The 1920 Farrow's Bank Failure: a Case of Managerial Hubris Case Study

1. Farrow started out as an outspoken critic of usury (Hollow, 2014, p. 5). He thought that the banking sector was too eager to give loans to poor people who could not pay them back and from whom the banking industry could earn a great deal of interest. He even wrote a book about it. Then he established his own bank that focused on people of small means. Based on the beginning of his career, one would think Farrow to be an ethical man who was trying to help poor people save money or borrow money if they needed to. With his feelings about usury being made known in his book and wherever he decided to talk about it, one would also think he would not practice usury in his own bank.

Perhaps because Farrow wanted to appeal to the non-traditional customer of banks, women, poor people and Jews (for some reason), it was successful. His idea to appeal to the nontraditional customer brought him success as a banker despite his lack of education or training in finances or economics (Hollow, 2014, pp. 5-6). Farrow’s Bank opened 72 branches all over the United Kingdom and the shareholders were receiving excellent dividends. However, as the bank increased in number and size, Farrow’s hubris did too. He began to think that he was pretty smart about many aspects of life.

Farrow’s ambition also grew (Hollow, 2014, p. 6). He started thinking that because he was such a successful banker, his ideas were also important to politics and legislation. His image and presentation became important to him. He began to use more and more grandiose verbiage to talk about himself and his bank, and began to promote the bank as living entity rather than the business it was. He thought the bank was some humanitarian mission and thought that his interests aligned with both shareholders and customers alike. Farrow started using the royal “we” when he talked about his bank (Hollow, 2014, p. 8).

2. Farrow clearly thought that his ideas of helping poor people, women and Jews, who were unable to bank in the other banks that were around at the time his was, was such an ethical thing to do that his methods did not matter. He allowed an untrained bookkeeper to keep the books without outside audit for decades. When the bookkeeper retired, his son who had no experience in accounting took over. It was only the two of them who managed the books for all of Farrow’s bank branches (Hollow, 2014, pp. 8-9). If Farrow had been as clever and as good of a business person as he claimed to be, and that in his hubris he thought he was, he would never have allowed such an unprofessional practice to occur. However, he actions show utter disregard for the safekeeping of his customer’s money.

Banks are audited to prevent them from straying off the ethical and legal path. The website, N Contracts (2019) says, “A bank audit is a routine procedure designed to review the services of financial institutions to ensure they are in compliance with laws and industry standards. . . .The focus of a bank or credit union audit is on compliance. Its purpose is to discover if the institution’s financial activities are accurate, legitimate, and complete” (N Contracts, 2019). An auditor is not affiliated with the bank. That way, if there is someone inside the bank, such as the accountant, who is doing something illegal, that person can be caught. The auditor also provides and independent assessment of the bank’s activities.

Farrow’s right hand man, Crotch, did not know anything about banking and was basically Farrow’s loyal brown noser rather than a managing associate as his title said he was. He never even looked at the accounting and did not have any education in accounting anyway (Hollow, 2014, p. 10). Crotch was just riding Farrow’s wave of hubris. Farrow and Crotch were so overconfident in Farrow’s abilities that the invited another bank to purchase shares and that is how their mismanagement and fraud was discovered.

3. The board that should have overseen the business management at Farrow’s Bank were all friends and admirers of Farrow. They probably all stroked his ego and he liked that, so he appointed them to the board of shareholders of his bank. They all wanted to be Farrow’s friend because he seemed confident, and people like that often attract other people. None of his appointees ever wanted to admit to Farrow’s flaws because that would have ended their fabulous ride on his hubris train pulled by the seeming success that was all just a smoke screen for many bad business decisions, mismanagement and fraudulent business dealings.

Farrow also detached himself from the employees of the bank and never checked the expenditures or any other documentation that would tell him about the day to day dealings at the bank (Hollow, 2014, p. 11). He became removed from the operations of the bank perhaps because he thought he was somehow blessed by the gods just to have incredibly good luck at running a bank. To him it was probably so easy and he just thought that was because he was so brilliant rather than because he was so incompetent. Farrow had no one in his employment to oversee the proper management. All of his board of directors and upper management were people who were more of an entourage than officers of a bank. He was removed from the dealings of the bank. Prince (2015) of talks about how the people who point out the flaws in ideas are good for business. She says, “Even if you believe you've vetted all aspects of the idea, and it’s guaranteed to be 100% successful, you're still just one person. If everyone on your team takes it for granted that you're right, nobody will catch the flaw in the plan” (Prince, 2015). No one knew the state of the Farrow’s bank’s business dealings because no one cared to know. They were more interested in Farrow himself because he was interested in himself and promoted himself rather than the bank, although he saw them as one and the same.

4. The outcome would not have been exactly the same if there had been more ethical people running Farrow’s Bank. The premise on which Farrow established his business was not really for a bank. Banks do not give loans to people too poor to pay their bills or people such as Victorian women, who did not really have an income that they could claim as their own, or if they did, it belonged to their husbands because women could not own money or property in Victorian times. However, it could have been an ethical business if there had been ethical people operating it. Or, if there had been ethical people surrounding Farrow who could have stopped him from committing fraud, it may not have fallen into such a state of affairs as it did. It would not have been as successful if that were the case, and perhaps Farrow would have not developed so much hubris. Hubris, according to Berglas (2015) of the Harvard Business Review, hubris is a reactive disorder. “Either the unfortunate consequence of endless laudatory press clippings leading to supreme over-confidence, or the culmination of a winning streak that causes a person to suffer the transient delusion that he is bullet-proof. Many good people will, under bad circumstances, suffer from hubris— but they tend to recover after toppling from their pedestals shrinks their egos back down to size” (Berglas, 2014). Farrow did not recover, so no matter what the business was, if he was involved, there was bound to be something go wrong because he did not have the ethical framework to be an honest businessperson. He was too enamored with himself to ever consider what his actions may be doing to others. To have a sense of ethics, one must be able to empathize with other people. Farrow did not have that capability. He was all about himself and that does not make a good business leader.


Berglas, S. (2014, April 14). Rooting Out Hubris, Before a Fall. Retrieved from Harvard Business Review:

Hollow, M. (2014). The 1920 Farrow's Bank failure: a case of managerial hubris. Journal of Management History, 20(2), 1-16. Retrieved from

N Contracts. (2019, August 8). Bank Audit. Retrieved from N Contracts:

Prince, K. T. (2015, October 7). Yes-Men Are Dangerous: Why You Need Irritating People on Your Team. Retrieved from