Kevin Stiroh, Head of Supervision for the Federal Reserve Bank of New York, describes the powerful market forces that work to encourage toxic behaviors. Furthermore, these behaviors are often not contained within firms but impose negative costs on shareholders, industry, and society as a whole. These behaviors can be mitigated through investments in social capital. Stiroh goes on to argue for a public sector role in encouraging such investments in order to build stronger, more resilient bank cultures.
Read the blog post: The Economics of Why Companies Don’t Fix Their Toxic Cultures