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The collapse of a European bank in the financial crisis: an analysis from strategic, stakeholder, ethical and governance perspectives

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  • Y. FASSIN

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  • D. GOSSSELIN
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    Abstract

    In 2007, the sub-prime mortgage crisis in the US spread to Europe and to the rest of the world leading to a global financial crisis without precedent since the 1930s. Banks stopped trusting each other, pushing the world’s economy into the deepest recession of the post-war era. After the collapse of the Lehman Brothers bank and Northern Rock in the UK, mid-September 2008, the Fortis group was the first major European bank and insurance company to fail in mainland Europe as a result of the financial crisis. Fortis was the leading Benelux financial group, with worldwide activities and one of the top five financial institutions in the EU. Until then, Fortis had been a success story of successive mergers of bank and insurance companies. Its leadership in corporate social responsibility (CSR), stood as a model for international cooperation, with Belgian and Dutch roots. The acquisition of a major part of the important Dutch financial conglomerate ABN AMRO, was a further step to bring Fortis in the top financial groups in Europe, with market leadership in Benelux. However, one year after this acquisition, as a result of the crisis in the financial markets, trust disappeared in the sector, leading to the collapse of the Fortis group. This fall has been one of the key events in the history of the Belgian and Dutch economy, with tremendous impacts and important consequences for all stakeholders and for the Belgian economy. The purpose of this article is to use the collapse process of Fortis’s during 2008 - 2009 as a basis for reflective considerations from strategy perspectives, stakeholder, ethical and corporate governance perspectives. The case analysis of the fall of Fortis based on those perspectives is relevant since Fortis group was internationally recognized as an example of good and leading practice in the field of CSR. Additionally most literature on causes of irresponsibility is in the fields of economics, and specifically the economics of market failure. The business ethics literature tends “not to address explanatory questions about the causes of CSR breaches” (Mackenzie 2007: 936).

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    Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 11/726.

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    Length: 56 pages
    Date of creation: Jun 2011
    Date of revision:
    Handle: RePEc:rug:rugwps:11/726

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    1. Maximilian J. B. Hall, 2008. "The sub-prime crisis, the credit crunch and bank “failure”: An assessment of the UK authorities’ response," Discussion Paper Series 2008_14, Department of Economics, Loughborough University, revised Nov 2008.
    2. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
    3. Damak-Ayadi, Salma & Pesqueux, Yvon, 2005. "Stakeholder theory in perspective," Economics Papers from University Paris Dauphine 123456789/406, Paris Dauphine University.
    4. Craig Mackenzie, 2007. "Boards, Incentives and Corporate Social Responsibility: the case for a change of emphasis," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(5), pages 935-943, 09.
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