The credit crisis of 2007–2008 can be blamed on a failure of regulation, a failure of macro-economic policy, even a failure in the working of our entire market system. However, the demise of traditional investment banking was also a spectacular failure of management, which has been all but overlooked.

When a company fails, the CEO must take responsibility for the failure. CEOs are rightly dismissed when the scale of the problems in their organizations becomes known. But, beyond the story of a few CEOs losing control of their organizations, this “failure of management” in investment banking is far larger. It is the story of a deeply flawed business model that encouraged bankers to pursue opportunities without regard for long-term consequences and to put their own interests ahead of those for whom they had responsibility – their employers and shareholders.

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Publication/Copyright: London Business School