Gustavo Ballvé on December 12th, 2011
Corporate Governance, Food for thought, Home, Mental models, Portfolio Management, Risk management

“A catalogue of disastrous decisions”: that’s the title of a story today in the Financial Times about the many failures in the downfall of the Royal Bank of Scotland. More specifically, the author recommends the chapter on “Management, governance and culture” (in PDF, starting on page 222) in the FSA’s report about that bank’s failure. In the face of it, the board looked knowledgeable and transparent, and the CEO didn’t look too dominant. We love going back to stories we’ve posted here, and in this case, the company went bust despite the fact that the “checklist” seemingly gave the “right” answers… (More on this here). But in the end, as the author concludes, the lessons are “… that a forceful chief executive in a complex business and with the wrong incentives is unlikely to be constrained by an over-large board of directors drawn from the same establishment pool – and that the results can be disastrous.

A quick summary of Jon Corzine’s handle of MF Global, posted yesterday in the NYT’s Dealbook column, also shows some impressive similarities.

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