Taisei International

Tyco International is cited as an example of corporate corruption enabled by the late-1990s stock-market bubble. The book uses the company and its chief executive, Dennis Kozlowski, to show how inflated valuations, executive incentives, weak board attention, and investors’ diminished scrutiny could erode the expectation that fair dealing served a company’s long-term interests.

The bubble and weakened incentives

The late-1990s bubble created conditions in which the short-term rewards of self-interested conduct could outweigh the prospect of future gains from honest business. Executives at companies such as Tyco had extensive stock options, while their boards of directors paid them little attention. When inflated share prices could not be justified by future cash flow, the future itself appeared less lucrative than the present, weakening the incentive to protect a company’s long-term health.

The book contrasts this situation with a healthier form of capitalism, in which people expect the long-term benefits of fair dealing to exceed the immediate returns from sharp dealing. In the bubble, executives could instead benefit enormously in the near term, while the long-term costs of misconduct seemed less consequential. Tyco is presented as one of the companies in which that shift in incentives mattered.

Dennis Kozlowski and executive compensation

Kozlowski serves as the concrete example. The text argues that it is difficult to see how he could have made $600 million honestly while remaining Tyco’s chief executive. Dishonestly, by contrast, the book says, it was remarkably easy. The comparison makes the scale of the incentives visible: the question is not simply whether an executive might act dishonestly, but whether the rewards of doing so had become so large that ordinary expectations of long-term responsibility no longer held.

Investors, the book argues, should have recognized that the rules had changed. Executives had less reason to keep promises or worry about the long-term condition of their businesses when short-term gains were so substantial. Yet investors, intoxicated by the bull market, stopped performing even the due diligence expected of trusting shareholders. Tyco’s example thus belongs to a wider account of a market in which confidence and rising returns displaced scrutiny.

A broader failure of accountability

The discussion places Tyco within a system meant to restrain corruption but, during the bubble, capable of enabling it. Auditors, analysts, underwriters, and stock exchanges were supposed to help distinguish trustworthy companies from untrustworthy ones. Their authority depended on credibility and on the expectation that firms would suffer consequences when they failed to do their jobs. The passage identifies a breakdown in that expectation: institutional safeguards did not reliably impose accountability as companies’ valuations and executive rewards soared.

Tyco’s role in the account is therefore illustrative rather than a complete history of the company. The text does not detail the company’s subsequent legal or corporate outcomes. Instead, Kozlowski’s reported fortune and the conditions surrounding it sharpen the book’s central point: trust and long-term cooperation are vulnerable when immediate gains swell, oversight weakens, and investors cease asking whether corporate promises are credible.