SUBPRIME LESSONS HIT HOME FOR CEOs IN OTHER INDUSTRIES

THE WALL STREET JOURNAL
Feb 25, 2008

Far from Wall Street, executives in other industries and their advisers are finding management lessons in the subprime-loan meltdown. JIM BRADFORD, dean of Vanderbilt University's Owen Graduate School of Management, sees another lesson in the subprime woes: Make sure subordinates feel comfortable delivering bad news -- promptly. It's possible that earlier strong warnings of mounting subprime problems may have helped top bank executives react better.

 

Mr. Bradford speaks from experience. Before entering academia, he was CEO of glassmaker AFG Industries, a unit of Japan's Asahi Glass Co. He tried to foster a candid environment by also praising and promoting people who disagreed with him or who brought him bad news.

 

That candor helped thwart disaster at least once. In the mid-1990s, a customer told an AFG sales representative about a potentially serious safety problem. A forklift at the customer's warehouse had crashed into some AFG glass intended for shower doors. The break pattern indicated the glass hadn't been properly tempered and could cause injuries. The sales representative told Mr. Bradford about the problem, and AFG alerted shower-door makers before the faulty glass reached consumers.

Mr. Bradford later praised the rep at meetings. "You really want to encourage that conduct, as painful as it may be," Mr. Bradford says. "You don't want to have to wait until the Federal Trade Commission or a safety group is coming to you."