Over the 22 years Tyco grew substantially through key acquisitions and growing diversity within the corporation. Some key acquisitions included: •1974: Simplex Technologies, manufacturers of undersea fiber optic telecommunications cable •1976: Grinnell Fire Protection Systems, manufacturers of and contractors for fire sprinkler systems •1979: Armin Plastics, manufacturers of polyethylene film products •1981: Ludlow Corporation, manufacturers of packaging products. The addition of these companies, a total equity of $49 million, $500 million in total sales, and a net worth $140 million pushed Tyco into the spotlight as a major conglomerate.
All of the accomplishments and growth of Tyco can be contributed aggressive management by Roseburg and all executives who followed in his footsteps. Tyco is comprised four business units: Electrical and Electronic Components, Healthcare and Specialty Products, Fire and Security Services, and Flow Control. The Company’s name was changed from Tyco Laboratories, Inc. to Tyco International Ltd. in 1993, to reflect Tyco’s global presence. In 1997, after the merger with ADT, Tyco moved its incorporation from Massachusetts to Bermuda.
Over the last two decades Tyco has seen an impressive rise, booming business, devastating scandal, and complete resurrection of the organization. The company’s ethics have been under fire due to staggering legal setbacks. Fortunately, Tyco has been able bounce back, but the road back wasn’t an easy one. Spheres of Influence There have been many influences that shaped and molded Tyco since its inception in 1960. On July 19, 2001, the U. S. Consumer Product Safety Commission and Tyco Fire Products LP affiliate, Central Sprinkler Company, nnounced a voluntary replacement program.
The recall was in response to defective O-ring seals. Central Sprinkler Company took action when they discovered that the O-ring sprinklers were degrading over time. According to their findings, the sprinkler heads could corrode or contaminants such as salt could affect the O-ring seals. Those factors could have caused the sprinkler heads not activate in the event of a fire. (CPSC, 2001) The labor and free parts replacement covered 37 million fire sprinklers with O-ring seals made from the mid-1970 until 2001.
There were also 167,000 sprinkler heads also recalled made by Gem Sprinkler Company and Star Sprinkler Inc. This move by Tyco management was prompted for two serious reasons. The first reason for the recall was the quality of the product that was released by Tyco. After extensive research and testing, Central Sprinkler Company was fortunate to catch the defect in its own product. The second and probably the most motivating factor was the prospect of massive lawsuits stemming from a faulty O-ring. Had the fault been overlooked, many lives would have been put in danger.
The sprinkler recall wasn’t the only recall the Tyco International was faced with; there was also recall on smoke detectors. On May 19, 2006, Tyco Fire & Security in cooperation with the Consumer Product Safety Commission released a product safety recall on Tyco Fire & Security Fire Detection Systems. It was estimated that the recall affected about 21,000 Fire Detection Systems throughout the United States. The fault fire detection systems very susceptible to reduced sensitivity to smoke in conditions of high humidity and high temperature.
If this were to occur, the senor on the device could have delayed detecting the presence of smoke in the event of a fire. Tyco Fire & Security contacted building owners and managers with these sensors and provided free software upgrades. Like the recall of the sprinkler O-rings, Tyco International management was forced to correct this potentially disastrous problem. Not only is this an issue of ethics, but also an issue of legality. By being proactive in the problem, many lives were saved, the company’s reputation was in tact, and no legal issues emerged.
In 1992, Dennis Kozlowski became CEO of Tyco International and spearheaded an aggressive acquisition strategy that led to the acquiring multitude of companies. Over the decade Tyco International enjoyed a steady improve in earnings and Kozlowski was constantly ranked as one of highest paid CEO’s in the United States. In 2002, on the heels of talks about splitting up the company into four separate companies, Tyco International came under fire for illegal accounting practices. It was later discovered that there were millions of unauthorized payments made to CEO Dennis Kozlowski and other Tyco employees.
Dennis Kozlowski resigned from the company shortly after the scandal, leaving shareholders and Tyco employees unsure of the company’s future. According to reports, 11 names among the 51 Tyco employees who, at Kozlowski’s direction and without board approval, received $56 million in bonuses that in effect canceled out loans they had taken from the company’s relocation program. It was also found that $50 million was paid to Kozlowski and former chief financial officer Mark Swartz. The company said Kozlowski misused $62 million of the company’s coffers to purchase a $16. million apartment on Fifth Avenue in New York and $14 million for improvements and furnishings to the apartment.
Some of the furnishings that lacked any “legitimate business purpose” included a $15,000 dog umbrella stand; a $17,100 traveling toilet box; a $6,000 shower curtain; a $2,200 gilt metal wastebasket; and $2,900 for coat hangers. Overall, between 1995 and 2002, Kozlowski only paid back $21. 7 million of the $62 million. (CBS, 2002) After appointing former Motorola COO Edward Breen to CEO, Tyco International filed two federal lawsuits against Kozlowski and a federal suit against Swartz.
Kozlowski and Swartz were charged with enterprise corruption and grand larceny for allegedly stealing $170 million from the company and obtaining $430 million through the fraudulent sales of securities. Both were convicted of all but one count. In this case Tyco made right decision to prosecute anyone involved with this case. If the scandal would have been poorly handled, the financial repercussions would have been devastating. In 2003, Tyco adopted the Guide to Ethical Conduct in order to guide and advise employees as to correct procedures and warn of unethical practices and behavior.
Each year Tyco employees are now required to take an ethics course and sign an ethics statement upon completion. Soon after the fallout of the scandal Tyco was faced with lawsuits from investors. These investors lost money from securities they purchased from Tyco between Dec 13, 1999 and June 7, 2002. Tyco was able to settle with investors for 2. 97 billion dollars. The Tyco settlement is currently the largest ever by a company (Norris, 2007). On June 29, 2007, Tyco broke up into three independent companies, each with its own management group.
The three companies are Covidien Ltd, Tyco Electronics Ltd, and Tyco International Ltd (formerly Tyco Fire & Security and Tyco Engineered Products & Services). CEO of Tyco International, Edward Breen and his management staff have begun work on re-establishing Tyco’s name and reputation in the business community. The commitment to ethical business practices can be seen in the company’s governance statement: Tyco believes that good governance requires not only an effective set of specific practices but also a culture of responsibility throughout the firm. Read more about our commitment to the highest standards of corporate governance.