Tyco’s problem was a result of top executives and members of the board not overseeing what was legal and what wasn’t within their company. CEO’s Kozlowski and CFO Swartz failed to disclose millions of dollars of low interest and interest free loans they received from Tyco. The executives unethical behavior resulted in shareholders benefits being written off which ended the company going into a massive debt. The top executives displayed greed for money.
1. What do you think Kozlowski motivation for trying to avoid sales taxes on his art purchases was? Kozlowski motivation was power and greed for money. Kozlowski knew that he was in a top position of authority, and most likely believed that no one was going to question his position or the wrong things that he was becoming involved in. There was also no real accountability present or loyalty to Tyco. Kozlowski realized that if he purchased the artwork with Tyco funds and then falsified the records, then he wouldn’t have to pay the taxes out of his own pocket and took a great risk that no one would find out. He abused Tyco’s assets for his own monetary gain.
2. Explain the concept of commingling assets with respect to the Tyco case Commingling assets is and is the act of mixing the funds belonging to one party with those of another party, especially when one party has responsibility to keep the funds separate for the other party. Tyco used this as a way to go around the system for its on personal gains, hiding the true intentions of its executives. Commingling personal with business assets is overall a poor business decision. The executives treated the company’s money as if it were your own. Also, the executives used Tyco’s business assets for their own personal gain by purchasing artwork, multiple real estate properties, jewelry, and other costly items for personal use. By commingling assets, the executives caused attention from taxation authorities and SEC and other criminal investigations due to their deceptive behaviors.
3. Would it have been possible for the board of directors to see the adjustments taking place in the different programs at Tyco? The board members could have found the wrongful adjustments taking place, but not very likely in this case. In a sense, the board of directors is as much at fault as the offending executives because if they played a more proactive role in the business operations, then the executives may not have gotten away with as much as they did for the long period of time. If they had taken a more active role, they would have found misleading documents and fraud schemes that were happening way sooner than when they were eventually discovered.
As a result of the board not taking an active role, the executive’s actions went on for some time without any notice. The executives knew what they were doing was wrong and illegal, being involved in tax evasion, inflated profits and commingling assets. The executives were also handing out illegal unauthorized bonuses. They also become involved in paying off official to be quiet on the matter. Overall, the wrong doers of the company knew that their actions were illegal, unethical, and costly to Tyco, but they risked all of these things for their own personal gain. They believed that no one would catch on to their actions, but like all crimes that criminal commit, it eventually catches up with them.