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Aquisitions?

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1,000 acquisitions? Are you sure? Could you cite me to an authority for that? I'm the person who wrote in the "200 acquisitions" figure. I did so based on a statement on p. 72 of Roger Lowenstein's book, Origins of the Crash (2004). --Christofurio 00:27, Nov 27, 2004 (UTC) I see, i came across that info today when i was reading "Crafting and Executing strategy 14th edition" by Arthur A. Thompson Jr. page 252. The books ISBN is 0-07-288444-4 I also found it hard to believe, mainly because i feel books published by McGraw-Hill are terribly useless. I would however not object with reverting back to 200 companies, but be aware that someone felt that they have acquired 1000 companies and there may be truth in that [1] If you read this article, you will come across this paragraph "Dennis Kozlowski was an acquisition junkie. In the decade after he took over as chief executive, Tyco International spent tens of billions of dollars to buy nearly 1,000 businesses around the world. By 2001, Tyco was in fire alarms, medical products, waste-water treatment, and, well, you name it. Revenues soared from $5 billion in 1996 to $34 billion in 2001. But there was a problem: The acquisitions were masking tepid performance in the underlying businesses. Return on equity over the same period dropped to 16.3% from 17.4%. All of those deals, and the resulting mass of physical assets, had made Tyco a lesser company -- and that was before Kozlowski got caught shipping empty crates to New Hampshire." [2]

I think its disappointing that the Tyco page only talks about financial matters. I couldn't glean much from this article that gives these financial matters significance if the article doesn't discuss what Tyco does. —Preceding unsigned comment added by 75.75.116.120 (talk) 04:41, 29 September 2008 (UTC)[reply]


Managing Agency Conflicts at Tyco International

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Managing Agency Conflicts at Tyco International



June 3, 2004



Agency conflicts are the conflicts of interest which naturally arise when the manager of a firm owns less than 100% of the firms stock. This is the situation in most large firms. When this situation arises, managers have an incentive to behave in a way that may enrich themselves personally, at the expense of the shareholders. (Intermediate Financial Management, Brigham & Daves 2004) This paper will examine how agency conflicts were allowed to get out of control at the upper management levels of Tyco International (TYC), and the steps that were taken to reduce the agency conflicts.

Shareholders incur agency costs to control the firms’ agency conflicts. The shareholders vote on a Board of Directors, who essentially act as the agent of the shareholders, and can be considered the boss of the CEO. Although the shareholders vote on the Board members, the candidates are all nominated by the CEO. It is extremely rare for the shareholders to vote in favor of an alternate candidate.

It is in the best interest of the shareholders to have a Board consisting of “outsiders”, that is, people who are not company employees, vendors, business partners, or friends of the CEO. The majority of the Tyco Directors during the reign of L.Dennis Kozlowski were insiders.

Some of the outsiders on the Board were known to have business relationships with either Tyco or Kozlowski. Director Josh Berman received $360,000 annually from Tyco for “legal services”. Director Frank Walsh received a “finders fee “of $20 million for arranging a meeting between Tyco and CIT, a financial company which Tyco acquired. The Board was so weak that they were afraid to act on the Walsh payoff until they themselves were sued by shareholders. (tyco and the Fort(ress) of oblivion. Forbes Online 5/13/04 )

Institutional Shareholder Services rated the Tyco Board as “weak”, due to having too many insiders, an inadequate board structure, and ineffective by-laws. (Does the Board of Directors have a Backbone? Michael Ozanian, Forbes Online 5/12/03) Minutes of Board meetings only gave a broad overview of the meeting, and left out many significant topics. The Board allowed Kozlowski to report on the company’s audit, rather than have the auditor report to the Board directly.

Having a charismatic CEO, like Kozlowski, also has a tendency to weaken the Board and cause them to be less likely to question the CEO. Kozlowski was being written up in glowing terms by all the major business publications. Business Week reported that Kozlowski would bring shareholders and reporters to the official corporate headquarters, a 2-story wood frame building in Exeter New Hampshire, which emphasized typical New England frugality. The headquarters staff of only 70 people was heralded as an example of the new lean, mean business model. The headquarters people consisted of people in Kozlowski’s mold: “smart, poor, and wants to be rich”. (How Did They Miss a Scam So Big, Business Week Online, 9/30/02)

Stock analysts were also enlisted as an accomplice to Kozlowski. Merrill Lynch analyst Phua Young referred to himself in an email as an “employee” of Kozlowski, since his analysis was always in favor of Tyco, at the request of Kozlowski. (Young has pleaded guilty for his involvement, and has been fined $250,000). Other analysts were afraid to speak out against Tyco’s prospects, even as the debt, goodwill, and off balance sheet financing increased exponentially in the rapid acquisition frenzy. This is another form of agency conflicts where the investment bank has corporate and individual customers. The bank acts in favor of the well-healed company, at the detriment of the individual. (NASD Fines Former Merrill Analyst Phua Young, Forbes Online, 5/25/04)

Not everyone was fooled. In 1998, the pension fund of the International Brotherhood of Electrical Workers, (IBEW) owners of 29,200 Tyco shares, submitted a shareholder proposal which called for more independent directors. (Leaving the Little Guy Behind, US News.com 10/21/02) The proposal was voted down by the largest Tyco shareholder, Fidelity Investments, who earns $2 million per year running the Tyco employees 401k plan. Fidelity insists that they always vote in the best interest of the shareholders, however, Fidelity has voted against stricter corporate governance issues three quarters of the time. In this case, the Fidelity mutual fund shareholders were not well served, having lost $4.4 Billion in the Tyco share-price meltdown. The Fidelity situation illustrates an additional source of agency conflicts, where the interests of Fidelity clash with the interests of their mutual fund shareholders.


The results of the Weak Board

Today, with the indictments of Kozlowski, CFO Mark Swartz, and Legal Director Mark Belnick, the lean, mean, Tyco headquarters seems to be more of a setup by the CEO to keep out prying eyes. (Business Week)

Kozlowski and Swartz have been charged with grand larceny. Specifically they are charged with stealing $244 million as follows: $100 million for misappropriating money for himself, without Board approval. $58 million for unauthorized bonuses. $43 million for unauthorized loans. $43 million for taking personal credit for charitable donations made with Tyco money.

Kozlowski transformed a Compensation Committee-approved relocation program for all employees to a special program for a few senior executives. This move was never sanctioned by the Board. ( Tyco press release 9-12-02) Kozlowski, Swartz, and Belnick would take out relocation loans from this program, and then forgive the loans themselves, without authorization from the Board. Belnick received two loans, one for relocating to New York when he first hired on with Tyco, and another for a house in Utah. His Tyco office was only 2 blocks from his previous office in New York, so there was no need to relocate. In addition, Tyco does not have any offices in Utah.

The Key Employee Loan Program is another Tyco program which was looted by Kozlowski. This was a long-standing program for executives to set up loans to encourage stock ownership. The loans were intended to relieve the executive of the need to liquidate stock to pay taxes. Kozlowski turned this program into a personal line of credit. From 1997 to 2000 he took 200 loans worth $274 million, most of which were not used in accordance with the program. Kozlowski also falsely informed the Vice President of Human Resources that $37 million in Florida relocation loans would be forgiven for 40 employees, as approved by the Board, as a reward for completing the Tycom IPO. (Tyco Press Release)

Several Tyco headquarters employees knew that Kozlowski was wrong to take this money without Board Approval, but they were afraid to act because they knew the Board was weak and beholden to Kozlowski. Finally, when an employee uncovered a scheme by Kozlowski to avoid New York sales tax on purchased art work, the employee informed New York authorities, and Kozlowski was forced to resign.

Breen Initiatives

To replace Kozlowski, Tyco hired Ed Breen from Motorola. As soon as he was hired he demanded that all the members of the Board of Directors resign, stating that “If one member is left from the Kozlowski era, there will be no vigorous investigation and prosecution of Board misdeeds”. (Tyco press release). All Board members volunteered to not stand for reelection at the end of the year. Breen nominated all independent, outsiders for the Board. (Board independence has been determined by the Institutional Shareholder Services.) But before the old Board resigned, they approved a $45 million severance package for Swartz, even though he was being investigated for grand larceny. Kozlowski already had a severance package that would pay him until 2008, and could only be revoked if he was convicted of a felony. (NY Times 2-13-02)

Breen also acted to reduce the agency conflicts within Tyco. Michael Useem from the University of Pennsylvania was hired to develop the best corporate governance policies, assess the current companies practices, make specific suggestions as to how to implement and enforce best practices at Tyco, and to work with the Board to ensure that the necessary changes are made quickly and effectively.

A new ethics guide for all employees was adopted, and a four hour on-line ethics tutorial and test must be taken by all employees.

New delegation of authority policies were adopted to strengthen cash disbursements.

The Board of Directors has three committees: Audit, Compensation & Human Resources, and Governance. The Compensation committee determines if the officers are being compensated in accordance with the company policies and objectives.

Tyco had no corporate policy for severance or stock ownership. The Board adopted severance limits of 2 times annual salary with post employment benefits limited to outplacement services and health benefits, with no provisions for consulting, airplane usage, offices, or other perks (Jack Welsh take note).

Minimum stock ownership guidelines range from 2 times base salary for senior VP’s to 10 times base salary for the CEO. This policy is meant to align the executives objectives with the shareholder. The senior executives must retain 75% of vested stock, and shares acquired on options exercises, until certain minimum guidelines are met. Directors compensation changed from stock options to stock units which vest upon retirement from the Board. Board of Directors salary is fixed at $80,000 per year with $120,000 of stock units.

Tyco also changed auditors from Price Waterhouse to Deloitte & Touche, a firm known for its strict auditing procedures.

The position of Senior Vice President of Corporate Governance was created to oversee corporate governance policies and enforcement. The VP encourages questions from employees and has a column in the Tyco Newsletter highlighting relevant questions from employees. Many senior executives were replaced by Breen. The position of Corporate Ombudsman was created to be an impartial confidential, and independent source in addressing and resolving any concerns about Tyco’s operations and management from various sources, including employees, customers, suppliers, and the financial and regulatory communities. To further bolster the effectiveness of the Ombudsman, the Company has established a confidential toll free number that these sources can use to report their concerns to the Ombudsman. The Ombudsman reports to the Boards audit committee, and not to senior management. The vice president of corporate audit also reports to the Boards audit committee, and not to senior management. (Tyco Press Release) Employee Morale

Employee morale does not seem to have been affected to a great extent at Tyco Telecommunications, due to the Kozlowski events. Morale was already low due to the extensive layoffs which resulted from the business downturn. But when it was announced that the layoffs had come to an end, morale improved. No one will admit to having their morale affected by Kozlowski. Most employees possessed a sufficient amount of cynicism about upper management to begin with, and the Kozlowski events became nothing more than the subject of water cooler conversations. There was a strong interest in seeing Kozlowski spend a few nights in Rikers Island when he had trouble posting bale. There was also outright rooting for a conviction in the grand larceny trial. Many employees are owners of a considerable amount of Tyco stock. This caused a lot of stress when the stock price was in the teens and single digits. But now that the stock price has partially rebounded, most people who have been with Tyco for at least 5 years are close to breaking even on many of the shares purchased. Most employees recognize that they are better off than the stockholders in several companies such as Enron, Worldcom, and Global Crossing, who have lost everything. Tyco Telecommunications is one of the few Tyco divisions that actually carries the Tyco name, and would seem to be affected by the events more than other divisions.

Conclusion The Tyco experience will be used as an example of what can happen to a company when the Board of Directors allow themselves to become weak. Many lives have been disrupted, considerable money lost, and three executives are standing trial for grand larceny. The former board of directors are all being sued personally in 75 separate lawsuits. Tyco is suing the indicted executives, seeking a return of the stolen money and all wages since 1998. Investment banks are being sued for recommending to buy Tyco stock. Business publications that have lauded Kozlowski have lost credibility.

It would have been much simpler if the recommendation by the IBEW to get rid of the insiders on the Board was adopted, instead of being voted down by Fidelity.

Tyco has instituted many new policies to correct the agency conflict problems, including setting new ethics guidelines and delegation of authority policies, new policies for severance and stock ownership, and creating new senior level managerial positions that report to the Board. It was intended to make the Tyco governance policies the best in industry. It remains to be seen if the policies are the best in industry, but they are a significant improvement over the previous policies.

Products

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... Cyberskin? Unless there's some evidence for that, I'm going to remove it. Bushytails 03:21, 30 July 2007 (UTC)[reply]

Tyco/ADT Aquisition of Broadview Security

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Big news in the security industry. Article needs updating.

Cite error: There are <ref> tags on this page without content in them (see the help page).http://tyco.mediaroom.com/index.php?s=43&item=397 Smithw14 (talk) 23:41, 18 January 2010 (UTC)[reply]

Sentence

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In the article, it says that Mark H. Swartz was convicted but no sentence for Swartz is mentioned. I can not find Swartz in the U.S. Inmate Locator. —Preceding unsigned comment added by 86.177.171.194 (talk) 11:33, 2 March 2010 (UTC) Actually, Swartz got the same sentence as Dennis, 8 years and 4 months to 25 years. Swartz has the number 05A4823 in nysdocslookup —Preceding unsigned comment added by 86.177.171.194 (talk) 11:55, 2 March 2010 (UTC) See nysdocslookup.docs.state.ny.us —Preceding unsigned comment added by 86.177.171.194 (talk) 11:58, 2 March 2010 (UTC)[reply]

2002 Scandal

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This section lacks ANY citation. 206.244.94.18 (talk) 21:42, 15 April 2010 (UTC)[reply]

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Cork, Ireland?

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I see the move to Bermuda in 1997. but where is the move to Ireland? Is it part of the ADT transaction? Darci (talk) 22:04, 21 April 2016 (UTC)[reply]

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A Commons file used on this page has been nominated for deletion

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The following Wikimedia Commons file used on this page has been nominated for deletion:

Participate in the deletion discussion at the nomination page. —Community Tech bot (talk) 21:06, 7 October 2018 (UTC)[reply]

Proposed merge with Sensormatic

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No citations and inadequate body to necessitate its own article. Ethanpet113 (talk) 05:34, 6 December 2018 (UTC)[reply]

Oppose until adequate sources are found. No discussion is merited until then. Redditaddict69 (talk) (contribs) 05:16, 9 December 2018 (UTC)[reply]

Badly Confused with Tyco Electronics

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A large fraction of the content in this article has confused this relatively tiny security systems company with the far larger divisions of Tyco Electronics. The Corporate parent renamed itself TE Connectivity in 2011 but not all divisions and subsidiaries were renamed simultaneously. For example, content in this article discussing Tyco Printed Circuits Group is related to the giant Tyco Electronics, not Tyco International PLC. If you're going to get your jollies throwing rocks at firms that do things that are nearly impossible to do without eventually screwing up, at least throw them through the right windows. PolychromePlatypus (talk) 23:27, 9 June 2022 (UTC)[reply]

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