Chapter

Governance and Management

Thomas H. Stanton

in Why Some Firms Thrive While Others Fail

Published in print July 2012 | ISBN: 9780199915996
Published online September 2012 | e-ISBN: 9780199950324 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199915996.003.0009
Governance and Management

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Chapter 9 summarizes lessons from successful firms and their use of constructive dialogue to help prevent undisciplined risk-taking. The book’s recommendation, that constructive dialogue be required of all major financial firms as a way to strengthen them and contribute to their safety and soundness, builds on the work of Professor Sydney Finkelstein and colleagues about the need for respectful challenge to help offset the possibility of flawed decision making by a leader. Moreover, only effective supervision can help protect financial firms from a race to the bottom. In 2005–2007 lenders and borrowers took on increasing amounts of risk without regard to the consequences. Citigroup’s CEO sought government intervention to reduce risks that firms took in the race for market share and profits. CEOs can benefit from feedback from supervisors as well as their boards, management teams, and risk officers.

Keywords: Sydney Finkelstein; Citigroup; decision making; feedback; market share

Chapter.  8131 words. 

Subjects: Financial Markets

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