Business Case Studies, Economic Crises Case Study, US Financial Crisis: Is Keynesian Economics Still Relevant

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Case Title:

Is Leadership Responsible for 2008 Financial Services Meltdown?

Publication Year : 2010

Authors: P Sheth, J Thadamalla and A Syed

Industry: Banking, Insurance and Financial Services

Region:Global

Case Code: ECC0048IRC

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
The US sub-prime mortgage crisis indirectly led to the 2008 financial services meltdown, global recession claiming trillions of wealth worldwide and even to the requirement of the government bail outs or takeovers for the sake of survival of firms like AIG, Bear Stearns, Fannie Mae, Freddie Mac etc. These corporate meltdowns were the indication of a massive leadership failure across the financial services setting. These firms' executives might have ignored the level of risk their companies were taking in a bid to show results and increase their own compensation. The case facilitates discussion on whether leadership was the factor responsible for the 2008 financial services meltdown. It also highlights the origin of the leadership misfortune which stunned the financial sector - 'an excessive focus on individual financial goals at the expense of managing company interests'.

Pedagogical Objectives:

  • To conflict of interests: personal vs organisational interests.
  • To leadership lapses.

Keywords :  Leadership, Leadership failure, Behaviour of leaders, Financial services sector, Financial services meltdown 2008, Executive compensation and incentives, Individual financial goals, Organisational / company interests, Excessive risk taking, Short-term gains, Sub-prime mortgage sector, Lehman Brothers, AIG, Fannie Mae, Freddie Mac

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