How not to be in Dennis Kozlowski's dire circumstances.

• Author: Neal, Catherine S.
• Position: Interview

In his opening statements to the jury at the beginning of the first trial in September of 2003, L. Dennis Kozlowski's lead defense attorney Stephen Kaufman said, ". . . [Y] ou will not find proof that Dennis Kozlowski is a cheat, a liar or a thief," after which Kaufman asked, "Who then is this man? What is his background? What has he done in his lifetime? How can we better understand who this man is?"

I spent two and a half years trying to answer the questions Kaufman posed to jurors. My objective was to understand Dennis Kozlowski and to figure out what happened at Tyco that sent him to prison. I immersed myself in the businesses of Tyco International Ltd. I studied how Kozlowski developed as a manager, rose through the ranks, and became CEO, and I learned how he ran the rapidly growing diversified conglomerate that made a lot of money making and selling anything from home security systems, to fire sprinklers, to undersea telecommunications cable, to medical devices. I reviewed thousands of documents and spoke to those who worked in Tyco corporate operations when Kozlowski headed the company. I examined the corporation's structure, culture, accounting, financial statements, compensation policies, and governance. I became well versed in all things Tyco.

Looking back with the advantage of 10 years' perspective and access to a mass of information, I envisioned what it was like to be at Tyco as Kozlowski built his career, and when he was CEO. I became a fly on the wall in Tyco corporate offices in 2002--when Kozlowski's world imploded and the company became ensnared in a very public scandal.

After processing everything I found and learned and saw, I have some observations that may be helpful to individuals who don't want to find themselves in the same dire circumstances that befell Dennis Kozlowski.

Problems with the board

In my assessment of what went wrong at Tyco, the board of directors is at the top of the list. The problems are too numerous to name, but following are some of the most troubling:

* Why was the testimony of directors who said they could not recall approving or did not approve bonuses meaningful, or at all credible? They didn't recall many pieces of their decisions.

* A director testified that he didn't even read the half-billion dollar Retention Agreement until he wanted to figure out how to get rid of Kozlowski.

* Directors had "huddles" where no minutes were recorded--it's impossible to know what was and wasn't decided or...