The 1920 Farrow's Bank Failure: A Case Of Managerial Hubris

Farrow’s Bank Failure
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Farrow’s Bank Failure: A Case of Managerial Hubris
Introduction
In most of the business management and ethical business practice courses, Farrow Bank’s failure is a compulsory part for the students to understand the results of the hubristic behavior on the manager’s part. This case study reveals how the leadership practices, the corrupt corporate culture, low motivation and hunger for more power and money caused the bank’s executives and employees to discontinue ethical practices. A thorough evaluation of this case also provided an opportunity to understand how managerial hubris could block the ways for ethically justified decisions. Further, a critical analysis is presented of pressures that are associated with ethical decision making and how such an ethical approach could have reduced the disastrous impacts of bank failure.
The Effect of Leadership, Corporate Culture, Motivation and Power
Managerial hubris is a result of overconfidence, which tends to come after a leader, manager, or an employee, who is accepted as key personnel in an organizational setting achieves a certain level of success. The factors which help an organization to develop, usually practiced by the manager, mainly: the leadership skills, motivating behavior and exercising power, negatively affected Mr. Thomas and so to the bank’s corporate culture.
The laid-back attitude of a few members from the bank’s board of Directors, Crotch and Hart decoyed Mr. Thomas Farrow to managerial hubris (Hollow, 2014). This was a situation where he started making some material mistakes. Firstly, he would run the daily operations and affairs of the bank in his own way. Secondly, he altered the figures and misrepresented a number of things in the bank’s financial reports. This way, he kept backing up his own investments which soon burst like a bubble and gave no benefit to even himself.
An analysis of Mr. Thomas Farrow’s leadership qualities at that time are of paramount importance to understanding the bank’s failure in greater detail. He was a dominant person and dictated a number of tasks performed by the subordinates. A time came when he started considering himself above laws, rules and regulations and did not stay compliant to the statutory requirements provided by the legislative authorities. Even after getting sued and declared a convict, Thomas Farrow kept refusing confidently all the charges he was accused of.
The loose external reporting procedures and obligations further contributed to his greed of power. Further, the external controls became a lesser stricter and flexible. This allowed the internal operations to go inefficient too and the staff soon started behaving unprofessionally. This hazardous mechanism kept running into action from the time the bank got its registration as a Credit Bank under an Act of 1904 called the Friendly Societies Act (Hollow, 2014). The main difference between the mentioned act and a conventional 1900 Companies Act was the extent of compliance, as required for joint-stock banks.
In effect of this, the accounting and financial reporting rules were stretchy. Thomas kept using leadership te...