Ldr 531 Week 2
Examining a Business Failure
By the end of second quarter 2008, North Carolina-based Wachovia Corporation had grown to become the 4th largest bank in the United States with assets of $812 billion. Since its establishment in 1979, the company expanded its footprint through many mergers and acquisitions. Some of the large ones in its history were with First Union in 2001, with Alabama-based SouthTrust Corporation in 2004, and with Golden West Financial Corporation in 2006. In April 2008, Wachovia recorded its first loss in seven-year resulting in the dismissal of its Chief Executive Officer, Ken Thompson (Rising, 2013). During the 4th quarter 2008, Wachovia executives were negotiating deals with CitiCorp and with Wells Fargo. After much controversy, Wells Fargo offered $18.1 billion to acquire Wachovia’s operations and debt. By the end of 2011, banking operations previously advertising the Wachovia logo were now bearing the Wells Fargo red and yellow brand.
Effective leadership behavior could have predicted Wachovia’s failure. Effective leadership from within a company determines the success of the company. For large public corporations like Wachovia, success is determined by decisions made by the board of directors with the assistance of executive leadership. According to Borak (2010), “Wachovia appeared on the brink of failure due to its exposure to adjustable rate mortgages that the company acquired to the Golden West Financial Corporation acquisition” (p. 21). The decision to join forces with Golden West Financial was made by Thompson. It was believed that he ignored his own management team’s resistance to the deal (Foust, 2008).
Wachovia’s Executive Team allowed a risky venture during the peak of the housing bubble. Joint ventures initiated by Wachovia were done successfully in the past. To be sure the financial experts at Wachovia knew of the risks and implications associated with the variable mortgage rates entered into by Golden West and
By the end of second quarter 2008, North Carolina-based Wachovia Corporation had grown to become the 4th largest bank in the United States with assets of $812 billion. Since its establishment in 1979, the company expanded its footprint through many mergers and acquisitions. Some of the large ones in its history were with First Union in 2001, with Alabama-based SouthTrust Corporation in 2004, and with Golden West Financial Corporation in 2006. In April 2008, Wachovia recorded its first loss in seven-year resulting in the dismissal of its Chief Executive Officer, Ken Thompson (Rising, 2013). During the 4th quarter 2008, Wachovia executives were negotiating deals with CitiCorp and with Wells Fargo. After much controversy, Wells Fargo offered $18.1 billion to acquire Wachovia’s operations and debt. By the end of 2011, banking operations previously advertising the Wachovia logo were now bearing the Wells Fargo red and yellow brand.
Effective leadership behavior could have predicted Wachovia’s failure. Effective leadership from within a company determines the success of the company. For large public corporations like Wachovia, success is determined by decisions made by the board of directors with the assistance of executive leadership. According to Borak (2010), “Wachovia appeared on the brink of failure due to its exposure to adjustable rate mortgages that the company acquired to the Golden West Financial Corporation acquisition” (p. 21). The decision to join forces with Golden West Financial was made by Thompson. It was believed that he ignored his own management team’s resistance to the deal (Foust, 2008).
Wachovia’s Executive Team allowed a risky venture during the peak of the housing bubble. Joint ventures initiated by Wachovia were done successfully in the past. To be sure the financial experts at Wachovia knew of the risks and implications associated with the variable mortgage rates entered into by Golden West and
References: Borak, D. (2010, September). A Postmortem on Wachovia. Investment Dealer 's Digest, 76(33), 21-21. Foust, D. (2008). Wachovia: One Thompson Deal Too Many. Retrieved from http://www.businessweek.com/stories/2008-06-02/wachovia-one-thompson-deal-too- manybusinessweek-business-news-stock-market-and-financial-advice Givray, H. S. (2007, Sep 03). When CEO’s Aren’t Leaders. Business Week, 102-102. Retrieved from http://search.proquest.com/docview/236777071?accountid=35812 Rising, A. (2013). Wachovia Corporation Timeline. Retrieved from http://charlotte.about.com/od/jobsbusiness/a/wachovia.htm