Corporate Fraud
In the modern corporate world frauds are not uncommon. Companies use frauds and financial schemes for the sake of enormous profits, and do not think of the long-term consequences they are likely to face. Although American companies are actively engaged in developing different forms of ethical principles and norms, these rarely stop managers on their way to becoming rich, and although many of them finally find their legal punishment, corporations have proved to be a fertile soil for unbelievable financial frauds at the edge of the 20th century. Does that mean that ethics and corporate activity are incompatible? Or, does that mean that American companies are inherently unable or unwilling to follow the principles of business ethics? In reality, it is because companies still do not see ethics as an essential component of their organizational culture, and unless employees and managers realize the importance of being ethical, stakeholders will further face the risks of being deceived by top managers.
When it comes to discussing the major corporate frauds in America, researchers often associate the word “fraud” with the name of Enron. However, if not for Enron, Tyco would have become an example of the most serious and most sophisticated financial fraud in the corporate world. The story of Tyco dates back to the beginning of 2002, when its CEO L. Dennis Kozlowski began his gradual but rather quick movement to becoming extremely rich. In 2002 Kozlowski was named one of the top 25 corporate managers in the U.S., after purchasing the CIT Group and its share prices reaching almost $60.00 (U.S.A. Today). Unfortunately for many, the same 2002 for Kozlowski was marked with the rapid share price decline. He was accused of one of the major frauds in the history of America. “Led by one-time CEO Dennis Kozlowski, a number of Tyco’s top executives illegally took over $600 million in cash and stock from the company. The money was obtained by abusing their positions to misuse Tyco compensation programs” (Coombs 178). Automatic bonuses, loan programs, relocation programs – all those were used to hide Kozlowski’s illegal activities.
The story of Tyco would not be so demonstrative, if not for the fact that Kozlowski engaged a whole set of managers in his frauds. They did not even suspect they were participating in a well-developed financial scheme and deception. Lower-level managers were confident that they acted on behalf of the board and did not see anything wrong in their cooperation with Kozlowski (Coombs 178). That Kozlowski spent $1 million to celebrate his wife’s birthday also shows the amount of money he was able to obtain from his illegal initiatives (Coombs 178).
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