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Why Some Firms Thrive While Others FailGovernance and Management Lessons from the Crisis$
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Thomas H. Stanton

Print publication date: 2012

Print ISBN-13: 9780199915996

Published to Oxford Scholarship Online: September 2012

DOI: 10.1093/acprof:oso/9780199915996.001.0001

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Company Governance and the Financial Crisis

Company Governance and the Financial Crisis

(p.67) 4 Company Governance and the Financial Crisis
Why Some Firms Thrive While Others Fail

Thomas H. Stanton

Oxford University Press

Chapter 4 addresses governance and the financial crisis. Successful firms had strong CEOs who invited constructive dialogue, from the board of directors, their management team, and their risk officers. Good communications were essential for success. The chapter quotes a gentleman at a successful company who said proudly, “the CEO often asks my opinion on major issues,” and then added, “but he asks 200 other people their opinions too.” Unsuccessful firms often had dominant CEOs, weak boards, and risk managers that they disregarded. Unsuccessful firms were unequipped to deal with early warning signs that the mortgage market was weakening. Their leaders did not seem to have access to feedback so that they would ask and reflect on simple questions that could have raised warning flags. Problems were compounded by compensation systems that emphasized short-term rather than long-term financial performance.

Keywords:   board of directors, feedback, compensation, mortgage market, risk officers, constructive dialogue, early warning signs

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