Tyco Deal Will Add to Checkered Legacy of Johnson Controls CEO Molinaroli

Already having survived last year’s revelations of his affair with a company consultant and his being swindled in a Ponzi scheme, Molinaroli recently pivoted to an even bigger deal with huge implications for the Milwaukee-based diversified industrial giant and his own career.

Late last month, Molinaroli announced a transformative merger with Ireland-based Tyco that would create the 14th-largest industrial in the U.S. by market capitalization and tilt the surviving company decisively toward building equipment and climate controls, even further away from the auto-supply trade which Johnson Controls has been de-emphasizing for some time.

The deal also would save the new company about $150 million in taxes by avoiding the U.S. corporate rate that averages 35%, versus Ireland’s 12.5%—a move that Democratic presidential candidate Hillary Clinton derided as a tax “perversion.”

“We will be creating a new company that will be something special,” said Molinaroli, who took the helm of Johnson Controls in 2013 and will stay on as chairman and chief executive for a time and then gradually transition out of leadership by 2018.

But while analysts and investors largely greeted news of the deal positively, that doesn’t mean Molinaroli was as widely hailed as he might be. It’s not getting him off the hook for his previous indiscretions.

In 2014, he failed to disclose an affair with a woman who was a consultant to Johnson Controls; the board found he violated the company’s ethics policy and docked his pay package by $1 million, meaning that he still took home $19.5 million for that year.

And last fall, it came out that Molinaroli had lost $2.5 million to a man who was convicted of fraud for running a $50-million Ponzi scheme. Molinaroli was outed by a newspaper report in Florida.

But remarkably, the Johnson Controls board stuck by Molinaroli after that incident too, because it was a personal deal that didn’t violate company policy or squander corporate assets.

Still, as Erik Gordon, a University of Michigan business professor, told Automotive News, “In an era when investors and the public expect earnings performance to be accompanied by ethical conduct, it’s a surprise he’s running JCI let alone the combined company.”

Interestingly, after the merger presumably passes regulatory muster, the combined company will have the legacy of at least two CEOs with less than stellar reputations for behavior. Former Tyco CEO Dennis Kozlowski left prison early last year after serving more than six years for his 2005 conviction for looting nearly $100 million from Tyco in myriad ways.