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The CEO's Boss: Tough Love in the Boardroom resources

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2 T H E S O C I A L C O N T R AC T story is the rescue of Tyco International through the partnership of Jack Krol, lead director, and his CEO/chairman, Edward D. Breen. Breen, pre- viously the president and COO of Motorola, was appointed the new chair- man and CEO of Tyco in 2002 and came to the company in the midst of a devastating failure in leadership. Th e former chairman and CEO Dennis Kozlowski and former CFO Mark H. Swartz had been accused of stealing $600 million from the company, and in 2005, aft er a retrial, both men were sentenced to 8 to 25 years in prison. Breen believed that drastic change was needed to save the company, and he saw it as his responsibility to be hard on the problems facing Tyco. Bringing a world- class leadership team with him, he immediately acted to stabilize the company and restore shareholder confi dence. To this end, he committed to replacing the board of directors and the leadership team under Kozlowski with a team of in de pen dent directors. In August 2002, with the priority of improving the company’s corporate governance, Breen announced the appointment of Jack Krol as lead director.2 Like Breen, Krol believed that big changes and tough decisions were necessary to get the company back on track. Th e stage was set for a partnership based on strong but shared beliefs. By the end of 2005, Tyco’s revenue had reached nearly $40 billion un- der this leadership team. However, despite the company’s renewed success, on January 13, 2006, Tyco and its board of directors announced its intent to separate Tyco into three distinct, publicly traded companies. According to Breen: In the past several years, Tyco has come a long way. Our balance sheet and cash fl nancial and legal issues ows are strong and many legacy fi have been resolved. We are fortunate to have a great mix of businesses with market- leading positions. Aft er a thorough review of strategic options with our Board of Directors, we have determined that sepa- rating into three in de pen dent companies is the best approach to en- able these businesses to achieve their full potential.3 Th erence between the dysfunctional is decision further emphasized the diff leaders that had left and the pro- active team that had taken their place. Fol- lowing the separation, Breen remained at the head of Tyco International. In October 2007, at a meeting of the Outstanding Directors Exchange (ODX) in Chicago, I attended a table discussion with Jack Krol in which he and Ed Breen discussed the recent changes that had taken place within the

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