The 1920 Farrow’s Bank Failure: A Case Study of Managerial Hubris

Regarding the case study on “The 1920 Farrow’s Bank Failure: a case study of Managerial hubris”, and based on the thought that regulators evaluated Thomas Farrow as being inflicted by managerial hubris at the time of the Bank’s collapse in 1920, I would confidently say that corporate culture, leadership, power and motivation greatly influenced Thomas’ level of managerial hubris. The corporate culture of Farrow bank had granted Thomas, the CEO and founder of Farrow bank, full-encompassing powers(Hollow, 2014). Thomas was the man behind all the innovations and corporate changes that took place in the bank. He was the face of the bank and as the size and prominence of the bank accelerated so did his powers and ambitions. He had the power of using the pages of his Bank’s in-house publications to air his ideas on governance and great leadership such as his views on how the British government would support job growth to stimulate economic growth(Hollow, 2014).

With so much power and ambitions, Farrow conducted several mismanagement cases and covered up the demising success of the Bank through false documentations and mishandling information related to the bank. Farrow’s leadership was self-centered and didn’t acknowledge any advice from outsiders. Further, the absence of any external controls on the bank at the time allowed Fallow to easily get away with his poor leadership habits. (Hollow, 2014) identifies Farrow as a man with a grandiose voice, who used the term ”we” when addressing the Bank’s procedures and progress. Fallow’s motivation to mold managerial hubris was out of his greed to make so much money at the stake of Fallow Bank’s success. The desire and motivation to make the most got him involved with illegal business dealings as well as mismanagement of funds which ended up pinning down the Bank’s success.

Ethical decision making is a fundamental factor to consider in decision making especially on the basis of moral awareness development among managers. As leaders or managers, character and integrity constitute the foremost features of leadership. Failure to consider ethics and management as an integral has led to downfall of several organizations.

(Jamnik, 2011) argues that hubris is a leading cause of unethical behavior among managers which is commonly associated with financial manipulation and mismanagement. Further, hubris weakens moral awareness among managers that motivate them to ignore external factors that in the long run yield unethical decision making in firms. The influence of managerial hubris on decision making can be combated through consideration and adoption of an outsider’s view on decisions they face.

According to (Hollow, 2014) Farrow was pressure free when it came to ethical decision-making at Farrow’s Bank. The absence of external forces on Farrow Bank granted him total control and freedom on the decision making. At that time the bank has no government regulators and policy makes that would influence the decision Farrow made regarding the firm. Farrow Bank had gained so much success and trust from its customers that no one was conserved with what was happening inside the firm. Fallow in return grew more and more ambitious and greedy that he forgot about morals and ethics. He failed to view the firm beyond the internal management and further ignored the importance of acquiring external consultation on decision making. With such power and ambition, Farrow lost touch with his ethical and moral responsibilities.

Success and ethics go hand in hand in managing a business. A sound ethical business culture is one that portrays strong leadership, good values, integrity, respect, loyalty and concerns on employees and customers(Cook, 2012, February). Ethical business culture of a firm is defined starting from the top most personnel on the structural chart. Leaders ethical practices are reflected on their decision making process especially in situation whereby they have to choose between what is ethically right and what is yields profits. Therefore, it is true to conclude that if Farrow Bank had a truly ethical business culture, the level of managerial hubris would have minimized and the Bank would probably have not failed and would still be recognized today. From the case study on the Farrow Bank, absence of external factors to question the way Farrow made decisions regarding the firm was highly accountable to its failure(Aminu, 2015, September) .Further, fallow as a leader had failed to acknowledge any views from external sources on the decisions he made. According to (Jamnik, 2011),managerial hubris is influenced by possessing of so much power by the manager as in the case of Thomas Farrow.

Further, I believe that the government would have played a major part in saving the Farrow Bank from failure. The President Obama’s government intervention of bailing out banks is an example on how the government can save banks from failure(Collins, July 14, 2015). With the aim of combating the financial crisis in America at that moment, President Obama did help save the American banks and strengthen the American economy(Collins, July 14, 2015). Further, presence of regulators such as the United States Federal Reserve that ensures ethical protocols are met by banks in America would have helped save the downfall of Farrow bank.

References

Aminu, A.A., & Oladipo, O. A. (2015, September). Application of financial ethics in annual financial reporting of banks. Economic and Social Development: Book of Proceesings, 226-235.

Collins, M. .. (July 14, 2015). ”The Big Bank Bailout,”. Forbes Magazine, New York, New York: Forbes. com.

Cook, R. (2012, February). Motgage crisis, ethics central in panel event. McClatchy. Tribune Business News.

Hollow, M. (2014). The 1920 Farrow’s bank failure: A case of managerial hubris? Journal of Management History, 20(2).

Jamnik, A. (2011). Business Ethics in Financial sector. Ekonomska Istrazivanja, 24(4), 153-163.