“Shareholders are screaming. The stock price has dropped from $60 to $7 a share. The press is hitting you every day with requests for info on the turnaround of the company. The prior management is still there, wondering about their futures. The prior board is there, wondering about their futures. And you’re there, trying to bring some order to this chaos.”
That’s how Eric Pillmore describes a typical day at the office when he stepped into the corporate governance role at Tyco early in August of 2002. The company’s CEO Dennis Kozlowski and CFO Mark Swartz had been convicted in June for theft and fraud involving more than $600 million from the company in the form of unauthorised stock trades and unapproved personal loans from the firm, which were subsequently written off.
Tyco had boasted stellar performances under Kozlowski’s leadership, increasing its generation of cash to five billion dollars in 2004 from 600 million within two years – largely through acquisitions which strengthened the company’s five core businesses. Kozlowski himself had been a long-time Tyco employee, starting in 1976 as an internal auditor, working his way up to CEO.
“He (Kozlowski) did a great job of building a set of core businesses that are very healthy today and were very healthy then,” confirms Pillmore (one of Kozlowski’s acquisitions, ADT, is today the cornerstone of Tyco’s security business). “He grew up in the company … then, I believe, he thought he was part of the company and that the assets of the company were also his. There was clearly a mixing of what he thought were his personal funds and what he believed to be the company’s funds. He saw them as one.”…(continue reading)