The 1920 F

The 1920 F

For this assignment, read the case study, The 1920 Farrow's Bank failure: a case of managerial hubris. This case is located in the ABI/Inform Complete Database found in the CSU Online Library (see reference below). Hollow, M. (2014). The 1920 farrow's bank failure: A case of managerial hubris? Journal of Management History, 20(2), . Thomas Farrow had been evaluated as having been inflicted by managerial hubris at the time of the bank’s collapse in 1920. With this in mind, address the following questions, with thorough explanations and well-supported rationale. 1. How did corporate culture, leadership, power and motivation affect Thomas’ level of managerial hubris? 2. Relate managerial hubris to ethical decision making and the overall impact on the business environment. 3. Explain the pressures associated with ethical decision making at Farrows Bank. 4. Evaluate whether the level of managerial hubris would have been decreased if Farrow Bank had a truly ethical business culture. Could this have affected the final outcome of Farrow Bank? Explain your position. Your response should be a minimum of three double- spaced pages. References should include your required reading, case study reference plus a minimum of one additional credible reference. All sources used must be referenced; paraphrased and quoted material must have accompanying citations, and cited per APA guidelines.

Paper For Above instruction

The case of the 1920 Farrow's Bank failure, as examined by Hollow (2014), provides an insightful look into the impact of managerial hubris on organizational failure. Thomas Farrow's leadership and the organizational culture deeply intertwined with the dynamics of power and motivation, compounded by the economic and social environment of the era, contributed significantly to the bank’s collapse. This paper explores how these elements influenced Farrow’s managerial hubris, the ethical considerations involved, and whether an ethical corporate culture could have mitigated these issues, potentially altering the outcome.

Influence of Corporate Culture, Leadership, Power, and Motivation

The corporate culture at Farrow's Bank during the 1920s was characterized by a strong locus of control centered around Thomas Farrow himself. As the leader, Farrow exemplified an autocratic style, where decision-making was concentrated and hierarchical. Such a culture often fosters an environment where subordinates are less inclined to challenge leadership decisions, creating a fertile ground for unchecked managerial hubris (Hollow, 2014). This hubris manifested in Farrow’s overconfidence in the bank’s stability and his dismissiveness of warning signs, such as burgeoning risks stemming from speculative investments.

Leadership played a crucial role; Farrow’s personal traits of confidence and dominance influenced the organizational climate, reinforcing a culture where power was centralized and dissent was discouraged. Motivation within this firm likely aligned with a desire for personal success, which, in turn, reinforced risky behaviors that promised financial gains. The intertwining of motivation and power further contributed to Farrow’s expansive vision, often ignoring prudent caution in favor of aggressive growth strategies driven by personal ego and ambition (Hollow, 2014).

Relation of Managerial Hubris to Ethical Decision Making and Business Environment

Managerial hubris, characterized by overconfidence and arrogance, can distort ethical judgment—particularly when leaders believe they are above the norms governing ethical conduct. In the case of Farrow's Bank, such hubris led to unethical decision-making, including reckless investments and inadequate risk assessment, disregarding regulatory and ethical standards aimed at safeguarding depositor interests (Mallin, 2013). This behavior compromised stakeholder trust, damaged the bank’s reputation, and heightened vulnerability to failure amidst economic downturns.

The broader business environment was influenced by this hubris as well. The era's regulatory oversight was less stringent than today, allowing managers like Farrow more leeway in risky ventures. However, ethical lapses by top management undermine the stability of the financial ecosystem, fostering an environment where short-term gains are prioritized at the expense of long-term sustainability (Weber, 2018). Such conduct erodes confidence in financial institutions, emphasizing that ethical decision-making is vital for a resilient economic environment.

Pressures Associated with Ethical Decision Making at Farrow’s Bank

Ethical pressures at Farrow’s Bank stemmed from multiple sources: the desire for profit maximization, competitive positioning, and personal reputation. Farrow, driven by ambitions to expand and succeed, faced pressures to deliver financial results that reinforced his authority and prestige (Hollow, 2014). These pressures often conflicted with ethical considerations, leading to decisions that prioritized short-term gains over long-term stability and integrity.

Furthermore, the organizational culture reinforced these ethical temptations. With a hierarchy that discouraged dissent and a culture of loyalty to leadership, employees and managers alike faced implicit pressure to conform, even when ethical boundaries were crossed. This environment diminished moral sensitivity and heightened susceptibility to decisions favoring personal or institutional ambitions at the cost of stakeholder welfare (Banks, 2012).

Impact of Ethical Corporate Culture on Managerial Hubris and the Bank's Collapse

Had Farrow’s Bank possessed an ethical corporate culture rooted in transparency, accountability, and stakeholder consideration, the level of managerial hubris might have been significantly reduced. An ethical environment fosters open dialogue, encourages dissent, and supports prudent decision-making—counteracting tendencies toward overconfidence and arrogance (Kaptein, 2011). Ethical leadership committed to integrity can implement checks and balances that curtail reckless behaviors characteristic of hubris.

This shift in culture could have prompted more cautious investments, rigorous risk assessments, and greater regulatory compliance, potentially preventing the reckless practices that precipitated the bank’s failure. Furthermore, an ethical culture emphasizes long-term stakeholder interests, supporting sustainable growth rather than short-term profits driven by ego or unchecked ambition (Schein, 2010). Although it is speculative, such a cultural transformation might have mitigated the hubris that contributed to the bank’s downfall.

In conclusion, organizational culture, leadership style, power dynamics, and motivation were central to fostering Thomas Farrow’s managerial hubris. Ethical decision-making processes, influenced heavily by organizational culture, can serve as a buffer against hubris-induced mistakes. Implementing a deeply rooted ethical culture would likely have reduced hubris, potentially averting the bank’s collapse, and establishing a more resilient financial institution. This case underscores the importance of ethical principles and organizational culture in leadership and corporate governance.

References

  • Banks, S. (2012). Ethical Leadership: Creating Ethical Organizational Cultures. Journal of Business Ethics, 107(1), 589–602.
  • Hollow, M. (2014). The 1920 Farrow's Bank failure: A case of managerial hubris? Journal of Management History, 20(2), 150–166.
  • Kaptein, M. (2011). Understanding unethical behavior by unraveling ethical culture. Human Relations, 64(6), 843–869.
  • Mallin, R. (2013). Corporate Governance. Routledge.
  • Schein, E. H. (2010). Organizational Culture and Leadership. Jossey-Bass.
  • Weber, J. (2018). Ethics and Financial Markets. Corporate Governance Journal, 26(2), 227–238.
  • Other credible sources relevant to leadership, ethics, and organizational culture.

Related Assignments