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CONCLUSION

The JPMorgan Chase example is instructive. Past success doesn't always predict success in the future. Not only is constructive dialogue an essential part of a company's culture, but it also must be continually nurtured by top management to ensure that it endures. If it is not embedded in the company's culture, constructive dialogue tends to be displaced by the drive for revenues, profits, market share, and the substantial personal remuneration that these bring for top officials of large, complex financial institutions and their most profitable units.

This leads to one final conclusion with respect to large, complex financial institutions, or other large, complex firms that require high-quality decision making to protect the public from major harm: Better decision making is essential in today's increasingly complicated world. Ultimately, if constructive dialogue is not part of a company's culture, then the company's regulators will need to insist on it. The crisis and its immense costs suggest that companies should change their approach and try to listen to their supervisors and consider the merits of supervisory feedback. While regulators may not have the depth of expertise or access to detailed information available to managers in a large financial institution, feedback from supervisors can sometimes help to improve decisions merely by posing the right questions and pursuing the answers. In the end, constructive dialogue from a regulator may be the only way for overbearing top company managers to receive the feedback that they need in order to make better decisions and to protect the public's health, safety, and economic well-being.[1]

ABOUT THE CONTRIBUTOR

Thomas H. Stanton is a Fellow of the Center for Advanced Governmental Studies at Johns Hopkins University, President-Elect of the Association of Federal

Enterprise Risk Management (AFERM), a former director of the National Academy of Public Administration, and a former member of the federal Senior Executive Service. His publications include two books on government-sponsored enterprises (GSEs), including A State of Risk: Will Government-Sponsored Enterprises Be the Next Financial Crisis? (HarperCollins, 1991), and two edited books on government organization and management. His two recent books are Why Some Firms Thrive While Others Fail: Governance and Management Lessons from the Crisis (Oxford University Press, 2012) and Managing Risk and Performance: A Guide for Government Decision Makers, co-editor with Douglas Webster (John Wiley & Sons, 2014). Mr. Stanton's B.A. degree is from the University of California at Davis, M.A. from Yale University, and J.D. from the Harvard Law School.

  • [1] See, e.g., Thomas H. Stanton, "Listening to Regulators Can Keep Your Bank out of Trouble," American Banker, August 20, 2012; and Thomas H. Stanton, comment to the Federal Reserve Board on the proposed rulemaking on "Enhanced Prudential Standards and Early Remediation Requirements for Covered Companies, federalreserve .gov/SECRS/2012/February/20120215/R-1438/R-1438_021312_105398_555068728868_l.pdf.
 
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