CEO Decision-Making Challenges
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MBAA/NAMS 2013 paper presentation, "CEO Decision Making Challenges in a Stressful Environment: A Delphi Study." Bill Minnis, Eastern Illinois University and William Wilhelm, Indiana State University

MBAA/NAMS 2013 paper presentation, "CEO Decision Making Challenges in a Stressful Environment: A Delphi Study." Bill Minnis, Eastern Illinois University and William Wilhelm, Indiana State University

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CEO Decision-Making Challenges Presentation Transcript

  • 1.  Perceived  Decision-­‐Making  Pressures    on      Community  Bank  Chief  Execu<ves     William  J.  Wilhelm   Indiana  State  University     William  C.  Minnis   Eastern  Illinois  University  
  • 2. Why  this  research?  •  frac<onal  leave  of  absence  to  serve  as   president/CEO  of  a  community  bank  2008   -­‐2012  •  discovered  troubled  asset  valua<on  issues  •  a  guest  speaker  in  Dr.  Wilhelm’s  moral   reasoning/ethics  course  •  a  member  of  the  president/CEO  community   during  period  
  • 3. Research  Objec<ves  •  iden<fy  and  rank  the  most  stressful  issues   among  community  banking  execu<ves  •  iden<fy  contextual  cues  (situa<onal  variables)   that  create  greatest  levels  of  perceived   pressure  
  • 4. Samples    •  CEO  Forums,  Community  Bankers  Associa<on   of  Illinois  •  Survey  (Delphi)  I,  n  =  12  (sent  to  22  CEOs)  •  Survey  (Delphi)  II,  n  =  8  (sent  to  26  CEOs)  •  Small  response  volume  in  both  surveys  noted  
  • 5. Survey  (Delphi)  I  –  Round  1  Q1:  “What  types  of  decision  dilemmas  cause  you  the  greatest  stress?”       –  Open-­‐ended  response  requested  
  • 6. Q2:  :    “Please  describe  how  various  stakeholder  groups  (name  the  group)  cause  you  the  greatest  stress  in  your  decision  making.”          -­‐Open-­‐ended  response  requested  
  • 7. Phrase  Analysis  Round  1  •  There  is  a  predominant  percep<on  of  diminishing   managerial  control  due  to  several  factors  including   regula<on  and  regulators,  higher  costs,  and  a  poor   loan  environment.    •  There  is  a  perceived  challenge  concerning  the   management  of  change.  This  was  primarily  associated   with  examples  of  personnel,  board  of  director  makeup   and  regulatory  prepara<on.    •  There  was  a  palpable  lack  of  op3mism  that   improvement  would  occur  in  the  “near  future.”    The   lack  of  op<mism  was  closely  associated  with   con<nuing  regulatory  development.  
  • 8. Round  2  (n  =  6)  Q1:    Provided  feedback,  requested  confirma<on   Ra<ngs  of  Round-­‐One  Interpreta<ons  
  • 9. Q2:    :    “Concerning  the  areas  of  diminishing  control,  management  of  change  and  a  low  level  of  op<mism,  how  will  you  alter  your  management  and  decision  style  to  deal  with  the  stresses?”  (n  =  5)   –  always  be  a  proponent  of  change   –  retain  more  capital   –  stand  my  ground  in  balancing  regulatory  compliance  tasks   and  serving  customers   –  lead  by  seang  a  posi<ve  example   –  delegate  more  responsibility  to  the  management  team  and   “tread  water”  for  five  more  years  and  get  the  hell  out  of   banking.      •  The  researchers  found  no  common  theme  in   this  range  of  responses  except  that  they  all   focused  on  performance  criteria.    
  • 10. Q3:    “Do  you  feel  Community  Bank  presidents/CEOs  are  struggling  with  ethical  conflicts  due  to  the  stresses  created  by  regula<on,  change,  and  the  uncertain  future?    If  you  do,  what  ac<ons  will  most  likely  be  involved?”       –  not  struggling  with  any  ethical  conflicts   –  few  ethical  cases  encountered  (no  clarifica<on)     –  to  characterize  conflicts  as  ethical  “sounds  too  drama<c”   –  Shouldn’t  cut  corners  to  save  costs  or  make  loans   –  regulators’  efforts  are  not  “directed  correctly”  (no   clarifica<on)     The  researchers  did  not  iden<fy  any  common  theme  in   the  responses.    Further,  there  were  no  responses  that   clearly  addressed  the  ethical  percep<on  issue.      
  • 11. Analysis  Survey  I  •  Pressures  primarily  from  regulators:   –  diminishing  managerial  control   –  change  management  challenge   –  lack  of  op<mism  •  Management  strategies  to  meet  challenges?   –  No  common  theme  in  range  of  responses  except  that   all  focused  on  performance  criteria.   –  No  responses  acknowledged  ethical  percep<on  by   public    •   Are  CEOs  struggling  with  ethical  conflicts?   –   No  common  theme  in  the  responses.       –   No  responses  acknowledged  ethical  percep<on  issue  
  • 12. Survey  (Delphi)  II  (n  =  8)  Q1:    :    “What  specific  issues  pressure  you  the  most  as  far  as  working  toward  profitability  and  also  ensuring  a  perspec<ve  among  stakeholders  that  your  organiza<on  is  performing  ethically?”  
  • 13. Q2:    :    “Please  describe  how  various  stakeholder  groups  (name  the  group)  cause  you  the  greatest  stress  in  your  decision  making.”     4  responses  -­‐  regulators     2  responses  -­‐  board  members   2  responses  -­‐  none  
  • 14.  Q3:  “How  do  you  deal  with  poten<ally  being  perceived  as  unethical  in  the  preceding  issues  that  you  iden<fied?”      
  • 15. Analysis  Survey  II  •  Same  pressures  as  iden<fied  in  Survey  I  sample  •  Despite  direct  ques<oning  about  public  ethical   percep<ons,   –  responses  acknowledged  only  performance  metrics   –  ethical  percep<on  issue  dismissed  as  not  relevant  
  • 16. Conclusions  •  CEOs  in  both  surveys  did  not  recognize  any   ethical  contexts  inherent  in  iden<fied  stressful   situa<ons.  •  This  may  be  manifesta<on  of  moral  decoupling.      •  Moral  decoupling  heuris<c  warrants  further   inves<ga<on.    
  • 17. moral  decoupling  -­‐  wherein  judgments  of  performance  are  separated  from  judgments  of  morality    
  • 18. Future  of  Research  Effort  •  Follow-­‐up  presenta<on  of  Delphi  findings     with  par<cipants    •  One  more  opportunity  to  gather  data  from   their  response  and  consider  moral  decoupling  •  Will  consider  longitudinal  study  to  measure   ongoing  changes  in  percep<ons  and   management    
  • 19. References  •  Ariely,  D.  (2008).    Predictably  irra5onal:    The  hidden  forces  that  shape  our  decisions.    New      York:    Harper  Collins.      •  Bank  of  America  sells  29  branches  to  Arvest.    (December  17,  2012).    Trefis.com.  Retrieved      January  18,  2013  from:  hlp://www.trefis.com/stock/bac/ar<cles/158493/bank-­‐of-­‐america-­‐sells-­‐29-­‐branches-­‐to-­‐arvest/2012-­‐12-­‐17.      •  Bazerman,  M  &  Tenbrunsel,  A.  (2011).    Blind  spots:    Why  we  fail  to  do  what’s  right  and  what  to      do  about  it.    Princeton,  NJ:    Princeton  University  Press.      •  Bhalacharjee,  A.,  Berman,  J.  Z.  &  Reed  II,  A.    (2012).  Tip  of  the  hat,  wag  of  the  finger:  How      moral  decoupling  enables  consumers  to  admire  and  admonish.    Journal  of  Consumer  Research,  39,  000.    Retrieved  December  22,  2012   from:  hlp://www.jstor.org/stable/10.1086/667786.          •  Black,  L.  &  Hazelwood,  L.  (March,  2012).  The  effect  of  TARP  on  bank  risk-­‐taking.    Board  of      Governors  of  the  Federal  Reserve  System  Interna<onal  Finance  Discussion.      •  Cocheo,  S.  (2008).  Handling  people  in  a  “mixed  up”  office.  ABA  Banking  Journal,  100,(  5),  18-­‐24.        •  Cocheo,  S.  (2010).  Puang  money  on  a  horse,  and  other  angles  on  risk.  ABA  Banking  Journal,      102,(1)  9.      •  Crowe  Horwath  LLP.  (2012).  Survey  indicates  bank  merger  and  acquisi<on  market  likely      to  remain  stalled.  29  Feb.  Survey  Results.        
  • 20. References  con<nued  •  DeYoung,  R  &  Duffy,  D.  (2004).  The  challenges  facing  community  banks.  Society,  41,      (2).  42-­‐52.      •  FDIC  Failed  Bank  List.  (2013).  Federal  Deposit  Insurance  Corpora<on,  Retrieved  January  13,      2013  from:  <hlp://www.fdic.gov/bank/individual/failed/banklist.html      •  French,  K.,  Baily,  M.,  Campbell,  J.,  Cochrane,  J.,  Diamond,  D.,  Duffie,  D.,  Kashvan,  A.,      Mishkin,  F.,  Rajan,  R.,  Scharfstein,  D.,  Shiller,  R.,  Hong  Shin,  H.,  Slaughter,  M.,  Stein,  J.,  Stulz,  R.  (2010).    The  Squam  Lake   Report.  New  Jersey:  Princeton  University  Press.        •  Gazzaniga,  M.  (2011).  Who’s  in  charge?    Free  will  and  the  science  of  the  brain.    New  York:        Harper  Collins.      •  Hussein,  F.  (November  11,  2012).  Lending  wars:  Compe<<on  heats  up  between  banks,      credit  unions  in  commercial  loan  business.    Daytona  Beach  News  Journal.      •  Kahneman,  D.  (2011).    Thinking,  fast  and  slow.    New  York:    Farrar,  Straus  and  Giroux.      •  Kahneman,  D.  &  Tversky,  A.  (1984).  Choices,  values  and  frames.    American  Psychologist,      39(4),  341-­‐350.      •  McTaggart,  T.  &  Callaghan,  M.  (June  22,  2011).  Challenges  currently  facing  community      banks,  including  requirements  of  the  Dodd-­‐Frank  Act.  Financial  Services  Alert,                
  • 21. References  con<nued  •  Morris,  C.  (2011).  What  should  banks  be  allowed  to  do?  Economic  Review,  Fourth      Quarter,  55-­‐80.  •  Pral,  M.  K.  (November  11,  2011).    Banking’s  black  eye:  The  banking  industry  has  taken  it  on      the  chin  of  late,  but  some  are  managing  to  take  advantage  of  the  situa<on,  Boston  Business  Journal,  Retrieved   January  16,  2013  from:  hlp://www.bizjournals.com/boston/print-­‐edi<on/2011/11/11/bankings-­‐black-­‐eye-­‐the-­‐ banking.html?page=all    Retrieved  January  17,  2013      •  Sauter,  M.  B.  &  Froelich,  T.  C.  (August  27,  2012).    Americas  most-­‐hated  industries,  MSN      Money  partner.    Retrieved  January  16,  2013  from:  hlp://money.msn.com/inves<ng/latest.aspx? post=259cb0ce-­‐1945-­‐4c30-­‐9db2-­‐a7656a9606a1.    Retrieved  January  16,  2013      •  World  Economic  Forum,  (2012).    Network  of  Global  Agenda  Councils  Reports  2011  –  2012:        Banking  &  capital  markets,  World  Economic  Forum.    Retrieved  January  16,  2013  from:    hlp:// reports.weforum.org/global-­‐agenda-­‐council-­‐2012/councils/banking-­‐capital-­‐markets/.            •  Yurcan,  B.  (2012).  Community  banks  have  unique  challenges,  opportuni<es.  A  panel      discussion  at  BAI  Retail  Delivery  2012,  “Winning  Strategies  for  Community  Banks”.    Retrieved  10  October,  2012   from:  <hlp://ww.federalreserve.gov/pubs/ifdp/2012/1043/ifdp1043.pdf.