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MGT7019-8

Professor Jo Ann Davis

Ethics in Business

Assignment 3: Evaluate the Price of

Unethical Behavior

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Intro
The value of ethics has dramatically diminished in todays society due to unethical
behaviors of individuals, which are constantly brushed off to the wayside. If we as a society
continue in this direction, we will be faced with an ongoing problem of a failing system of
morality (Stephens, Vance, & Pettegrew, 2012).

We explore this issue with Tyco International. In present day, Tyco International is still one of
the most well-known companies. When I hear Tyco, I think of toy trains. Tyco International has
expanded throughout the years and have tapped into the global market of fire protection and
security solutions (http://www.tyco.com/). There was a time when Tyco International was faced
with some challenges not only as a business, but as well as some unethical behaviors by
executives. A man named Dennis Kozlowski, former CEO of Tyco was responsible for
renovating the company from an unknown manufacturer that had a market capitalization of $1.5
billion to more than $100 billion (Kaplan, 2009).
Kozlowski as well as his partner, Mark H. Swartz, who was his financial advisor and
second in command was living the glamorous life having a $31 million dollar Fifth Ave
apartment, homes in Boca Raton, Florida, a yacht, jewelry from Harry Winston, Tiffanys and
purchased some high priced upscale art pieces (Sorkin, 2002, & Kaplan, 2009). However, 2002
was the year when many unethical practices by Kozlowski and Swartz were bought to into the
light.
Kozlowski was bringing in an enormous amount of profit, which kept shareholders happy
and satisfied. As long as shareholders are making money, there is less of a need to question

spending, which led to the misappropriation of loans unauthorized bonuses and other earnings to
occur for an extended period of time. The prosecuting attorney claimed that Mr. Kozlowski and
Mr. Swartz mishandled two corporate loan programs which were created to help employees pay
taxes on company stock, additionally, it was to provide assistance to employees in relocating to
homes near Tyco's offices in Manhattan, New York (Sorkon, 2002). Another factor that may
have contributed to the prolonged misuse of spending is that Kozlowski declares, Everything I
got was on the company books and none of it was hidden (Kaplan 2009 p. 2). In Kozlowski
mind, he felt that since everything was out in the open that he did not do anything wrong. This
may have contributed to why it took such a long time for proper actions to be taken seriously.
Tycos board of directors were not only inadequate, but lacked awareness in regards to the
proceedings surrounding criminal charges against Kozlowski, which emphasizes the careless
oversight of management that has a negative impact on many company boards (Strauss, 2008).
Kaplan (2009) suggests that greed, does not in it warrant or justify incarceration. If that
were so, then much of Wall Street would be held accountable for the economic demise of our
country that occurred in 2008. Many Americans are still feeling the effects of these poor
business decisions.
Kozlowskis actions which resulted in a period of jail time anywhere from eight to
twenty five years were not justified. Although, his bad decisions were corrupt, the
punishment did not fit the crime. Was what he did unethical? Yes. However, the jail
sentence was not fair in my opinion. Especially, when there has been an abundant of high
level executives who partake in misusing funds and are only given a slap on the wrist. These
high level executives crippled the economy in an attempt to better their own financial
positions. As a result, Americans are still faced with the effects of the wrongdoings of these

executives. All the meanwhile, these executives were provided severance packages and
bonuses. This is simply why this kind of behavior continues today. By awarding unethical
conduct, it simply sends out a message that it is okay and acceptable.
On another note, there are criminals convicted of atrocious and heinous crimes who
receive lesser of a sentence than Kozlowski. The putative crime simply does not seem to
warrant a punishment longer than many killers get (Kaplan, 2009 p. 2). We need to reevaluate our laws and find ways that will effectively teach individuals that conduct such as
this, is unacceptable. A possible suggestion would be community service and stripping
these executives of what they value the most, which is money.
Collewaert and Fassin (2013) argue that unethical behavior refers to ways that is either
illegal or morally unacceptable to the larger community (Jones 1991, p. 367). In addition,
Tonus and Oruc (2012) contend unethical behavior is a precursor for detrimental consequences
for others, which ignores policies, laws, and regulations that outline the broad legal parameters
for societys well-being (Danley, Harrick, Schaefer Stickland, & Sullivan, 1996).
It is very challenging to look at ourselves and evaluate whether or not we are acting
in an ethical manner. It requires executives and management to evaluate one self. In order
to self-evaluate efficiently, an individual must put aside their own pre conceived ideas and
look at themselves through the eyes and opinions of others. Collewaert and Fassin (2013)
claim that there is some difficulty in defining what actions constitutes unethical behavior
since it depends on the perception of the individual (Baker et al. 2006, & Fraedich 1993).
Typically, it is difficult to determine acceptable and unacceptable behavior due to the fact
that ethics mostly derives from an individuals character and what they perceive as right or
wrong. Furthermore, Kaynak and Sert (2012) stance in regards to unethical behavior are

affected by the contextual norms and the social groups the individual belongs to
(Badenhorst, 1994). The concept of limited ethics defined by Chugh et al. (2005)
proposes that situations or circumstances where individuals make their judgements are
subject to change dependent on their personal preferences and beliefs. Motivated
blindness, is one of the components of limited ethics established by Gino et al. (2008). Hill
et al. (2009), describes motivated blindness as the method through which individuals
demonstrate unethical conduct (Kaynak & Sert 2012 p. 220).
When an individual lacks moral values it is difficult for them to define unethical
behaviors. According to Kaynak & Sert (2012), the foundation of unethical behavior
particularly comes from a set of certain moral standards and beliefs. In addition, research
indicates elements such as the ethical culture of the organization, dishonorable behaviors of
executives, and absence of company policies on many concerns all contribute to unethical
behavior. There are two forms of unethical behavior examined in a business. The first type
relates to favor the company or institution. The other kind implicates supporting the
personal interests of the individual (Kaynak & Sert, 2012, p. 221). When executives are not
held accountable when they exhibit unethical behavior, it is now considered and perceived
to be acceptable behavior. Stephens, Vance & Pettegrew (2012) contend, once there is no
accountability for unethical actions, people will then rationalize their unethical behavior
and believe it to be acceptable (p. 18). The persons awareness in respect to fair and unfair
circumstances, further encourage how they view ethical or unethical behavior (Collewaert
& Fassin, 2013). To add on, given these individual differences, what may be perceived as
an unfair and unethical treatment by an entrepreneur will not necessarily be seen in the

same manner by their venture partner, who in fact may see their own behavior as common
business practice (Collewaert & Fassin, 2013 p. 637).
Moral reasonings of an individual can help contribute to their thought process
about ethics. Stephen et al. (2012), discusses Kohlbergs six stages of moral reasoning
which include:

Stage 1: being ethical for fear of being caught or punished

Stage 2: being ethical out of concern for ones self interest

Stage 3: being ethical because of peer pressure

Stage 4: being ethical because it is the rule, law, regulation or standard

Stage 5: being ethical out of concern for the good of others, (social
responsibility)

Stage 6: being ethical out of a concern for the moral principle involved
and knowing it is just the right thing to do
(Stephen, Vance & Pettegrew, 2012 p. 19)

There seems to be a lack of care and concern for the fellow man. Often times, I find that
people are all about themselves and their own personal situations. There used to be a time
when people in our society as a whole assisted each other without thought. Companies
would go above and beyond to solidify the lives and wellbeing of their employees. Today,
companies are more interested in the bottom line, this is the get it done at all costs
culture (Stephens et al. 2012 p. 19). Additionally, I find that people are more interested in
their own personal gain rather than the benefits of others.
Conclusion

In closing, ethics will frequently be a debated topic, since we all have our own
definitions of what constitutes right or wrong. Kozlowski had the business sense to create
billions of dollars for Tyco, International; nevertheless, he displayed unethical behavior by
mishandling company funds for his own personal use. Although Kozlowski was given an
unfair prison sentence, he is still guilty of breaking the law. Even though he is in prison, he
is not serving his jail sentence in the same manner as many other criminals. He is still rich.
He has remained a minority owner of the New York Yankees. In my opinion, I can sum up
this entire situation in one sentence. Right, wrong or indifferent, even if you get caught
participating in illegal activity, money is power.

References:
Collewaert, V., & Fassin, Y. (2013, April). Conflicts between Entrepreneurs and Investors:
the
impact of perceived unethical behavior. Small Business Economics, 40(3), p. 635-649.
Kaplan, D. A. (2009, December 7). Koz makes his case. Fortune, 160(11), p. 14-16.
Kaynak, R., & Sert, T. (2012, August). The Impact of service Suppliers unethical behavior to
Buyers satisfaction: an empirical study. Journal of Business Ethics, 109(2), p. 219-226.
Sorkin, A. R. (2002, September 13). 2 Top Tyco Executives charged with $600 million fraud
scheme. The New York Times. http://www.nytimes.com/2002/09/13/business/2-toptyco-executives-charged-with-600-million-fraud-scheme.html?pagewanted=all
Stephens, W., Vance, C. A. & Pettegrew, L. S. (2012, January). Embracing Ethics and an
analytic essay for the accounting profession. The CPA Journal, 82(1), p. 16-21.
Strauss, G. (2008). Tyco events put spotlight on directors' role. USA Today.
http://usatoday30.usatoday.com/money/industries/manufacturing/2002-09-15-tycodirect_x.htm
Tonus, H. Z., & Oruc, I. (2012, November). Unethical behaviors and their management in
Human Resource Management: A content analysis of a Companys Personnel regulation.
Turkish Journal of Business Ethics, 5(10), p. 173-181.
http://www.tyco.com/