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Auditing Moral Hazards for Post-Global Financial Crisis (GFC) Leadership
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Auditing Moral Hazards for Post-Global Financial Crisis (GFC) Leadership

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Here are the slides from the presentation that Professor Nada Kakabadse gave at the European Academy of Management (EURAM)'s 10th Conference on ‘Back to the Future’, 19-22 May 2010 at Vergata ...

Here are the slides from the presentation that Professor Nada Kakabadse gave at the European Academy of Management (EURAM)'s 10th Conference on ‘Back to the Future’, 19-22 May 2010 at Vergata University, Rome. The title of the session was Track 29: Re-Thinking the Role of the Firm in a Post-Crisis World.

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  • Friday 23 July 2010 Group name goes here

Auditing Moral Hazards for Post-Global Financial Crisis (GFC) LeadershipAuditing Moral Hazards for Post-Global Financial Crisis (GFC) Leadership Presentation Transcript

  • Auditing Moral Hazards for Post-Global Financial Crisis (GFC) Leadership Nada K. Kakabadse Professor in Management and Business Research Northampton Business School [email_address] http://www.kakabadse.com Prof. Andrew P. Kakabadse and Prof. Alexander Kouzmin EURAM 2010 10th Conference on ‘Back to the Future’ 19-22 May 2010 Vergata University, Rome Track 29: Re-Thinking the Role of the Firm in a Post-Crisis World
  • Structure
      • Context in which moral hazards occur in the post-GFC economy
      • Crisis and Economic Opportunities
      • Moral Hazards
      • The most pressing “moral hazards” which need to be addressed
      • Ways forward
    Page © N.K. Kakabadse et al
  • Context for Moral Hazards in Post-GEC Economy
      • Fallout from short-term currency speculation has largely contributed to
        • sharp collapses in the values of some national currencies
        • productive and financial collapse
        • crisis in values and life-style
      • Was crisis a large-scale failure of
        • regulation and government policy?
        • fuelled by greed of consumers as well as bankers and politicians, or
        • fundamental flaw in the neo-liberal model of capitalism ( unlimited growth/consumption) ?
      • Origins
        • Separation of markets from the state - markets are de-linked from competition (mergers and takeovers, not competition or “knowledge”; Mantra that ‘markets could, and should, do much better than the state’)
        • Separation of market from morality - illegitimate, unacceptable and illegal activities are profitable (anti-values as greed, self-indulgence, short-term preference or lack of judgment). Economic issues have also moral implications, encompassing many aspects.
        • Separation of labour from unit of production - Rent seeking and money markets are deemed as being new “real trade”
    Page © N.K. Kakabadse et al
  • Crises and Economic Opportunism
      • Reconciling economics, politics and public duty in crisis management is an on-going, “wicked” issue
      • Non-routine situations involve not only discretionary decision-making but resource re-distribution.
      • “ Uncertainty”; “ambiguity”; and “risk” are inherent characteristics of "tough" decisions in crises.
      • “ Natural” and “technological” crisis events may involve professionalism and ethical aspirations.
    • Crisis, as opportunity - Katrina’s New Orleans, a new political/federalist manifest, the out-sourcing state – “[New Orleans] will be re-built in a completely different way […] demographically, geographically, politically” (Scahill, 2007: 331).
    Page © N.K. Kakabadse et al
  • Moral Hazard
      • Involves the lack of any incentive to guard against a risk when one is protected against such risk
      • Insurance actually increases the occurrence of adverse events through its incentives to people who have insurance –
        • government bailing out of banks and other industries during GFC can be seen as actions that lack any incentive to guard against a risk in the future as these institutions are protected against such risk.
      • Can take a number of different outward appearances,
    • Are difficult to quantify empirically
    Page © N.K. Kakabadse et al
  • Most pressing “moral hazards” which need to be addressed
      • Moral Hazard 1: Setting the Precedent – “Too Big to Fail and Bail outs
      • Moral Hazard 2: External Gatekeepers - Auditors, Rating Agencies, Regulators and Government Agencies
      • Moral Hazard 3: Failures in Corporate Governance
      • Moral Hazard 4: Leadership, Hubris and Group Think
      • Moral Hazard 5: Invisibility and the Commercial-in-Confidence Sanctuary –The Lack of Transparency
      • Moral Hazard 6: Sanitized Language and Collusion in Business and Politics
    Page © N.K. Kakabadse et al
  • Way forward Page © N.K. Kakabadse
    • Crisis offers an opportunity for discernment, in which to shape a new vision for the future.
    • Opportunity for transition to:
      • New model of financing – socialised capital
      • Anthropological model of a firm:
        • Individual is first capital
        • Alignment of values of individuals and the corporate values
        • Crucial role of business - development of people
      • Humanistic Management
      • Transcendental leadership