Tyco Urged To Oust Directors
Kozlowski-Era Members Should Go, N.H. SaysNov 8, 2002 | The Boston Globe
The battle over Tyco International's board of directors heated up yesterday when New Hampshire regulators wrote to company chairman and chief executive Edward D. Breen, urging him to dump all the directors who served under disgraced former chief executive L. Dennis Kozlowski.
Mark Connolly, a deputy secretary of state and director of securities regulation for the state of New Hampshire, said he is opposed to any directors from the Kozlowski era staying on and possibly standing for re-election at next year's shareholder meeting.
''I believe such a move would not be in the spirit of the corporate governance reforms you are endeavoring to implement at Tyco,'' wrote Connolly. ''I also continue to believe it remains in the best interest of the shareholders to have all members of the board of directors who served with [Kozlowski] to resign as soon as possible.''
Breen took the helm at Tyco in July promising to make the company a standout in corporate governance, with strong rules and oversight intended to prevent abuses by insiders and protect the interests of shareholders.
The corporate overhaul was underscored by a motion passed by an 8-3 vote by the board Sept. 12 under which all Kozlowski-era directors would leave the firm next March.
That effort is now compromised by a plan, reported by The Wall Street Journal, under which two directors would stay on. They include Michael Ashcroft, who sold the ADT alarm company to Tyco in 1997, and Richard S. Bodman, a venture capitalist and Tyco director since 1992.
Asked about the letter from Connolly, Tyco spokesman Gary Holmes said, ''We're not going to have any comment on that.'' He declined to specify what the board will discuss at today's meeting.
The directors seeking to retain their seats, and a lawyer representing one of them, have argued that it's important to have ''continuity'' on the board, particularly at a company as complex as Tyco.
Ira M. Millstein, a partner at Weil, Gotshal & Manges who represents Bodman, didn't respond to messages.
Connolly, in his letter, said any need for board continuity could be satisfied by setting up a transitional period in which one or two current board members would serve in an ''advisory'' role but couldn't vote on board matters.
Meantime, he said, the newly elected board members would be more effective.
''I would like to point out that new board of directors would not be consumed with either defending itself or defining for itself how or why current members should be involved in the corporation,'' said Connolly in the letter.
Tyco two weeks ago agreed to pay $5 million to settle charges brought by the New Hampshire Bureau of Securities Regulation that mismanagement and lack of corporate control enabled Kozlowksi and former chief financial officer Mark Swartz to loot the company of millions of dollars. Tyco did not admit guilt, but agreed to submit annual reports on corporate governance matters to New Hampshire regulators for three years.