Case Detail

Case Summary

Washington Mutual (B): From Forty-Six to Sixteen

Case Number: 5-304-506(B), Year Published: 2009, Revision Date: February 16, 2010

HBS Number: KEL433

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Authors: Robert Dewar

Key Concepts

Leadership, Leadership Failure, Liability of Success, Ethics, Organizational Culture

Abstract

In 2004 Washington Mutual (WaMu) was touted by the business press as one of the most customer-focused, innovative, community-friendly, employee-loyal, and shareholder-enriching retail banks in the United States. Its stock reached $46.18 in May 2006, an almost 60% increase since 2001. CEO Kerry Killinger was lionized. By late 2008, however, WaMu’s stock had plummeted to 16 cents as it became infamous as the largest bank failure in U.S. history. Relying on publicly available published sources, the case documents eroding focus on customers, excessive risks in subprime mortgages, alleged unethical pressure on mortgage officers to approve bad loans, attempts by the CEO to retain his job, and the eventual termination of the CEO, sale of the company to Chase, and destruction of all shareholder value. Whereas the (A) case documents WaMu’s formula for success, the (B) case challenges readers to discover the seeds of destruction in the company’s leadership, culture, incentives, and human resource policies and practices. WaMu’s death contains some hard lessons of the danger of success and pride.

Learning Objectives

To help students learn the importance of ethics no matter how well managed a company is, the dangers of growth for growth’s sake, the perils of failing to listen to lower-level professionals, and the liability of too much success.

Number of Pages: 11

Extended Case Information

Teaching Areas: Management, Organizational Behavior, Strategy

Geographic: United States

Industry: Retail Banking

Organization Name: Washington Mutual

Organization Size: Large

Year of Case: 2008