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Kozlowski Gone, Will Swartz Follow?

Highest-paid CFO last year, out on street this year? Report says Tyco's CFO to depart.
Lisa YoonJuly 23, 2002

>> Here’s a familiar-sounding tale: medium-size company grows into global giant through buying binge in 1990s… In 2002, chief executive who led charge resigns under pressure and scandal as company finances falter… Shortly after, once-joined-at-the-hip CFO follows CEO out…

Sound like WorldCom’s Scott Sullivan? Sure, but that’s old news… Following Sullivan’s footsteps could be Tyco International Ltd. CFO Mark Swartz… Published report says Swartz, once a close ally of departed CEO Dennis Kozlowski, is on his way out at giant conglomerate…

According to story by Reuters, a number of Tyco analysts predict Swartz will be gone once the company appoints new CEO… Once a highly regarded CFO, Swartz’s future has been clouded by his close association with former chairman Kozlowski, who resigned last month just before criminal indictment on tax evasion charges…

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Also plaguing Swartz: growing criticism of Tyco’s accounting, which some observers say is overly aggressive. According to analysts in Reuters story, the longer Swartz stays, the harder it will be for Tyco to free itself from Kozlowski’s legacy—and nagging accounting worries… Reportedly, Tyco management, Manhattan district attorney, and the Securities and Exchange Commission now investigating whether company funds were improperly used to line executives’ pockets…

Since becoming CFO in 1995, Swartz played key role in executing Kozlowski’s vision of growth through acquisitions… Indeed, before he became finance chief, Swartz had been director of M&A at Tyco for two years… Swartz and Kozlowski’s buying spree —with hundreds of acquisitions costing more than $60 billion—made Tyco one of world’s largest manufacturing conglomerates… Swartz reportedly handsomely rewarded for his efforts: last year he was highest-paid U.S. CFO, according to research firm Equilar Inc., raking in almost $47 million in compensation…

Report says Tyco expected to name Kozlowski’s successor as early as September… Company also asking shareholders to vote on whether board should be expanded to 15 members from 11 at special meeting in September, a proposal investors likely to approve considering company’s current state of affairs…

Tyco expected to report net loss for the June quarter, thanks to $2.4 billion charge on sale of CIT Group Inc., which netted less than half of what Tyco paid for financial-services company…

>> Swiss fine-chemicals group Lonza Group is sold on Jean-Jacques Illi. Former SVP and corporate treasurer of Sotheby’s Holdings Inc. becomes Lonza CFO and member of executive committee August 13… Before joining auction house in 1999, Illi worked at Philip Morris Cos. for 10 years in various positions, including director of finance at Kraft Foods and Philip Morris Management Corp., and treasurer of Kraft Jacobs Suchard…. Earlier in career, he held finance positions at Hewlett-Packard Co. and UBS…

>> BTI Telecom Corp. promoted CFO J.W. Braukman III to COO post… Braukman will also continue as CFO… In his new dual role, Jay assumes direct responsibility for the company’s operations, including order processing, provisioning, and customer service…

Braukman, 48, joined BTI in January from broadband provider Rhythms NetConnections Inc., where he was EVP and CFO… Before that he served in a number of CFO posts at General Electric Co…. Most recently he was CFO of GE’s $8.5 billion information-technology solutions business, with operations in the United States, Mexico, Canada, Brazil, Europe, and Australia… Also served as finance chief of GE’s $1.6 billion Italian operation, Nuovo Pignone, and CFO of GE’s $1.4 billion transportation systems business based in Pennsylvania.

Quote of the Day

“In the U.S., we’re suggesting that companies change their metric for incentive compensation. Here, we are explaining what variable pay is. Or asking companies what their compensation plans are. Or even asking if someone is responsible for a particular business unit’s performance.”

—Patrick Furtaw, managing director at the Tokyo office of Stern Stewart, on introducing corporate Japan to the concept of a dedicated finance director position.
(For more on Japan’s CFOs, read “Yen Masters.”)

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