Case Study: Business Ethics (Essay Sample)

TYCO Case Study
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Institution
TYCO Case Study
The fundamental role of a company is to maximize the value of shareholders (Hansmann, 2012). A company is usually owned by shareholders, who put their stake in the company in form of shares. Their decision to invest in a company is made amidst the opportunity cost that the investment foregoes (Hansmann, 2012). As a result, investors expect to get a fair return on their investments, in form of dividends, capital growth and interests. In order to attain this feat, the shareholders appoint agents to run the company on their behalf, and these agents are principally managers and directors. Managers are the people involved in the daily activities in any concern, and should work towards attaining the key objective of a business, that is maximizing shareholders worth (Hansmann, 2012).
However, whenever the incentives due to the principals and the agents are not aligned, conflicts of interests usually crop up. Shareholders are of the expectation that the entire company profits should be distributed to them (Demsetz, et. Al., 2007). Managers, on the contrary, focus on their own personal growth and remuneration hence they prefer to retain some of the profits as a projection of future uncertainties of growth and profitability. The agents may hence be tempted to act in their own personal interests, compromising the interests of the principals who appointed them. This situation is referred to as the agency problem (Demsetz, et. Al., 2007). In TYCO’s context, one of the multinational corporations that deals with industries from hospital suppliers to fire sprinklers, the executives plundered the company for personal gain, placing the company on the edge of survival and rendering at risk the employment of thousands of employees in the organization.
To overcome this downfall plus the frustrations of both the employees and the shareholders, there was an increasing need for change, primarily on the management strategies (Herold, et. Al., 2008). Revolutionizing management strategies comprises of altering the application of various tools, skills, and processes in the course of an initiative, project or the organization at large. Change in management strategies should, nonetheless, be spontaneous. It should be systematic, emanating from the creation of an operative plan outlining when the amendment is needed, the procedure of approval of such alterations, how to effect the changes and subsequently monitoring and verifying whether the effected vicissitudes have generated the anticipated results (Herold, et. Al., 2008).
TYCO was a company enduring a tremendous downfall owing to misappropriation of funds by exaggerating the cost of expenses and claiming them as company expenses. Infinitesimal expenses, such as that of a shower curtain, could be embroidered to a figure of 6,000 U.S dollars. Consequently, an immense total of 600 million dollars was fiddled from the company and by extension its shareholders. It was discerned that the then Chief Executive Officer, Dennis Kozlowski and Chief Financial Officer, Mark Swartz, were accountable for the embezzlement. This transpired under the sentinel of the board.
This necessitated the need for management change, and Ed Breen took over the helm as the CEO in 2002. Breen was tasked with the onus of delivering the much needed change in TYCO to avert the imminent collapse. He had to turn around the diminishing morale of the organization, and the upsurge of frustrations amongst the employees. In correspondence with this prerequisite, he came up with diverse change management strategies, particularly those with an influence on turnover. He was fortunate enough to take up an organization with a robust operational and financial basis; hence there was a trifling prospect of bankruptcy on account of introduction of change.
Amongst the myriad changes introduced by Breen was the modification of unethical behavior that had taken its toll in the organization. This was to be effected by a turnaround team that he initiated to oversee the process of weeding out the unethical behaviors that were quite a norm in the organization. One of the mechanisms that Breen employed to eradicate unethical conduct in the organization was instantaneous replacement of the present board members. This was an indirect mechanism of emphasizing that he was privy to the actions of the board since they were the superintendents when the vice of fund larceny was transpiring. By the lapse of his first year of service, the entire executive team had been replaced by more competent individuals.
Following the overhaul of the executive team, he shifted his office to New Jersey from the former Manhattan office, which gave him a view of the car park as opposed to the Central Park previously. This move signified that Breen was determined to alter what was the past leadership style of TYCO. Overlooking the car park facilitated his supervision of staff as he could easily see their movement and also audit their punctuality. The foremost commitment by Breen was to reinvent TYCO’s integrity and credibility, sentiments he shared with employees and shareholders via an epistle. He emphasized on the culture of accountability and good corporate citizenship as the driving forces of the organization.
Another management strategy that he imposed was the modification of TYCO’s infrastructure. Infrastructural change was fundamental in effecting the new strategies and to also accommodate the additional units that were developed. The new management had the duty of creating novel ways in which the organization will be able to function as well as developing new organizational practices to be followed (Anderson & Ackerman-Anderson, 2010). For the aforementioned to be effectively implemented, six-sigma training was initiated in TYCO.
This training was pegged at enhancing the quality and efficiency of the products and services that the company offered to its customers. The challenges that the company faced revolved around communication of its new strategies, ethical stance and the implementation of the training programme (Anderson & Ackerman-Anderson, 2010). Being a company with a global orientation, TYCO had employed in excess of 260,000 employees globally hence communication to the entire staff...