AIG, Bear Stearns, Fannie Mae and Freddie Mac needed government bailouts or takeovers to survive. Lehman Brothers is in bankruptcy. Merrill Lynch has been sold. The shocking succession of corporate meltdowns signals a massive leadership failure across the financial services landscape, according to Wharton faculty. Executives at these troubled firms may have ignored or failed to see the level of risk their companies were taking on in a crusade to enhance results and their own compensation. When markets turned against them, their firms -- big as they were -- crumbled.
Wharton management professor Peter Cappelli says this type of lapse in leadership dates to the 1980s when companies began to focus on aligning executive incentives with shareholder interests. He believes an excessive focus on individual financial goals, at the expense of managing in the best interests of the company overall, is at the root of the leadership debacle that has rocked the financial services sector.
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