The Dynamics of Managerial Entrenchment: The Corporate Governance Failure in Anglo-Irish Bank

43 Pages Posted: 20 Apr 2017

See all articles by Gary Abrahams

Gary Abrahams

Exeter Business School

Joanne Horton

University of Warwick - Warwick Business School

Yuval Millo

London School of Economics & Political Science (LSE) - Accounting Department

Date Written: April 18, 2017

Abstract

What are the dynamics through which corporate boards led by dominant CEOs fail? We address this question by examining the case of Anglo Irish Bank. We focus on the dynamics in and around Anglo’s board of directors in the 3-year period leading to its collapse in 2008. Using documentary analysis and 21 interviews with Anglo’s senior managers and other key actors, we identify two interrelated sets of dynamics: a dominant CEO who used his influence to populate the board with affiliated individuals, leading to a low-skilled board and increasing further his dominance; and the establishment of norms whereby stock ownership signified loyalty rather than commitment to performance. We suggest these dynamics reflect a broader organisational change where new meanings were assigned to existing corporate practices, leading to poor scrutiny of executive decisions and subversion of intended incentives. Our findings contribute to the literature on managerial entrenchment by shedding light on how undesirable consequences of stock ownership are likely to emerge. More generally, we contribute to the management and corporate governance literatures by showing the dynamic and interdependent nature of factors that contribute to the emergence of organisational vulnerabilities and ultimately to corporate failures.

Keywords: Corporate Governance, Entrenchment, Social Ties, Stock Ownership, Irish Banking Crisis

JEL Classification: M14, M12, M51

Suggested Citation

Abrahams, Gary and Horton, Joanne and Millo, Yuval, The Dynamics of Managerial Entrenchment: The Corporate Governance Failure in Anglo-Irish Bank (April 18, 2017). Available at SSRN: https://ssrn.com/abstract=2955610 or http://dx.doi.org/10.2139/ssrn.2955610

Gary Abrahams

Exeter Business School ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

Joanne Horton (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Yuval Millo

London School of Economics & Political Science (LSE) - Accounting Department ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://www.lse.ac.uk/collections/accounting/facultyAndStaff/profiles/Millo.htm

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