THE QUESTION
Building Better Wall Street Leaders?
A major cause of the year-old financial crisis was a failure of leadership in a
financial sector that had become focused on its own short-term profits rather
than the long-term health of the economy. What does Wall Street have to change
to produce better leaders, a different culture and a more long-term focus?
POSTED BY BEN BRADLEE AND STEVE PEARLSTEIN ON SEPTEMBER 14, 2009 11:53 AM
Channeling the 'Animal Spirit'
We can describe what should happen inside financial institutions---but the real question is
how to confront the powerful forces that drive a short-term culture focused heavily on
remuneration and which are resistant to change.
Four fundamental, interrelated governance actions inside corporations are essential to create
real economic value (not the paper chase that brought the sector low), to enhance
accountability, to increase the confidence of investors and other stakeholders and, in this era
importantly, to ensure that the public trust and public mission of finance is honored.
• Boards of directors must redefine the role of the CEO--and then choose a leader who
meets the new spec. The CEO's first foundational task is to achieve a core balance between
taking economic risk and creating economic value (promoting creativity and innovation) and
managing economic risk (within a systemic framework of financial discipline) over a
sustained period of time. The second foundational CEO task is to fuse this high performance
with high integrity---tenacious adherence to the spirit and letter of formal rules, voluntary
adoption of ethical standards that bind the company and its employees, and employee
commitment to core values of honesty, candor, fairness, reliability and trustworthiness which
together address legal, ethical, reputational and public policy risk.
• Boards and business leaders must institute new management development processes for
corporate P&L and functional leaders that, at early stages in their careers, put strong