Journals Higher Education



Published: 12 July 2012

296 Pages | 19 b/w line


ISBN: 9780199915996

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Bookseller Code (AJ)

Why Some Firms Thrive While Others Fail

Governance and Management Lessons from the Crisis

Thomas H. Stanton

  • Access to new sources: As a staffer on the Financial Crisis Inquiry Commission, the author personally interviewed five CEOs of financial firms, a dozen risk officers, and numerous traders, investment bankers, commercial bankers, and mortgage lenders, as well as numerous regulators including present and former Governors of the Federal Reserve Board and senior career staff at the bank and thrift regulators. The author also had access to large volumes of internal documents from financial firms and regulators. The book draws on public material at the FCIC permanent website () and helps make it accessible to researchers and the public.
  • New theory: After spending a year at the Commission and months writing this book, the author finally figured out the fundamental difference between firms that failed and those that weathered the crisis. Successful firms had leaders who solicited feedback and engaged in a process of "constructive dialogue " to ensure that they heard many points of view before making decisions. They also had access to high quality information. Constructive dialogue is the essential ingredient for good management, and not merely good risk management. This is something that financial regulators should insist upon in their examination of financial institutions. The book also looks at nonfinancial firms (BP's Gulf oil spill, Massey Mining Co's mine explosion, PG&E's San Bruno gas pipeline explosion, etc.) and finds the same pattern of company management that makes bad judgments because of lack of constructive dialogue in decisionmaking.
  • Controversial thesis: The parts of this book that review the political process and the failure of regulators to prevent the carnage of the financial crisis raise the specter that the financial services industry, by repeatedly trying to undermine regulators and prudent regulations, lobbies against its own best interests. The book also shows this pattern in nonfinancial firms and their regulators.
  • Historical record: because this book draws on previously unpublished interviews and documents from the Financial Crisis Inquiry Commission it provides a valuable record of the inner workings of financial firms and regulators before and during the crisis. Thanks to the trove of materials from the Financial Crisis Inquiry Commission and interviews conducted soon after the crisis, participants speak in their own words about what happened.
  • Shows fundamental weakness in both private firms and government agencies, with flawed incentives that are likely to repeat themselves unless we strengthen organizational culture in both the public and private sectors to include regular processes of "constructive dialogue. " The book argues that the regulated companies have a stake in promoting the quality and capability of their regulators so that regulators become a source of useful feedback.

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