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We're all to blame for the current economic crisis

Failure of corporate governance encourage greed in the board and living room.

As politicians and pundits jockey for position pointing the finger of blame for the current state of the world economy, Professor David Hillier from Leeds University Business School says we are all to blame.

Professor Hillier, Centenary Professor and Ziff Chair in Financial Markets and the Business School's Head of Accounting & Finance Division, argues that all the danger signals for the current economic slump were clear back in 2003 but that people failed to recognise them because of failures in corporate governance and the regulatory system.

He said: "Believe it or not, the current events are caused by efforts to make senior corporate executives more accountable following the Greenbury Report on executive pay in 1995 which recommended performance-related remuneration and share options.

"Linking executive pay had a huge impact on the banking sector encouraging banks to undertake complex risk management and wrecking the fine balance which matched deposits against loan portfolios. It also encouraged stable mutual financial institutions like Halifax Building Society, Northern Rock and Bradford & Bingley to float on the stock market."

Northern Rock, Bradford & Bingley and HBOS, as it is now following a merger with Bank of Scotland, have all been bailed out by the Government.

Ultimately, however, Professor Hillier argues that no-one is blameless. Shareholders were to blame because they were happy to see banks taking risks because they were getting good returns on their investments.

Bankers were happy to take on risks because their executive compensation was linked to the increase in profits. Consumers were happy to borrow on credit because it was available and Governments were happy because they were getting tax receipts from all the business.

Professor Hillier now argues for a significant overhaul of corporate governance structures in the UK and abroad. He says: "Corporate Governance is not about rules and regulations.  It's about the ethical culture within organisations. 


"It's the accountability and transparency of the organisation. Without an ethical and accountable environment, corporate governance is at best, useless, and at worst, a means to further corporate malpractice."

For further information: 

Please contact the University of Leeds Press Office on +44 (0)113 343 4031 or email


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