There's nothing more dangerous for an organisation than a bullying boss. Look at RBS, where Sir Fred Goodwin bulldozed his board into a reckless takeover which led to the collapse of his bank, and much of Britain's financial system with it. Liam Fox too was a boss who was determined not to be thwarted. The story is a cautionary tale for our politics.
Sir Fred should have been tempered by his board and his chairman, Sir Tom McKillop. Instead, the chairman wrote in his 2007 annual report that "the acquisition of ABN AMRO will deliver good, long-term value enhancement to shareholders". We all know where that led. When Fox insisted on having Adam Werritty as an independent adviser, he should have been stopped too – either by his Permanent Under Secretary, Ursula Brennan, or ultimately by the Prime Minister.
I am told that Fox tried first to appoint Werritty as his fourth special adviser. This news reached the top brass, who objected vociferously. They resented the fact that the then Defence Secretary was already spending far more on foreign travel and his private office than his predecessors, at a time when he was cutting spending on the military and his civil servants. What's more, cabinet ministers were supposed to have only two special advisers, and Fox had already been given special dispensation for three.
Fox put a lot of pressure on Brennan to accede to his request. To her credit, she resisted. But he was so determined to have Werritty anyway that he then demanded his friend have an unpaid, unofficial role instead, with a certain amount of access.
It was at this stage that Brennan should have put her foot down. But she seems to have been intimidated by Fox's high-handedness. After all, he made a habit of not listening to her. At one meeting, a participant remembers the Defence Secretary playing with his BlackBerry while she was trying to brief him, and somebody felt obliged to interject on her behalf, "Secretary of State, you ought to listen to what the PUS is saying."
This was part of a pattern of behaviour. Fox also insisted on appointing an extra military assistant, Lieutenant Colonel Graham Livesey, despite opposition from the head of the Army, Sir Peter Wall. Livesey was considered not to be up to the job, but Sir Peter decided not to push the issue because he didn't want to sour relations with his political boss. Yesterday, it transpired that Livesey was the mysterious man in Fox's flat last April on the night it was burgled.
Then Fox took half his office with him on a two-week holiday to Spain this summer,at a cost to the taxpayer of £15,000. His excuse was that he needed a "temporary office" to keep on top of events in Libya and Afghanistan. No other Defence Secretary had needed one. And even his junior ministers thought it was odd, as they are used to taking turns to be in charge over the summer. Again, it went down badly in a climate of cost-cutting.
So why was nobody telling Fox to wind his neck in? Brennan seems to have been behaving like Jemima Puddle-Duck, beguiled or intimidated by the foxy gentleman. What is not yet clear, though, is whether she alerted her boss, the Cabinet Secretary, Sir Gus O'Donnell, to Fox's tricky behaviour.
She certainly should have done. And if she did, it would have been incumbent upon Sir Gus to alert the Prime Minister. For if Fox was ignoring the advice of his senior civil servants, he would need a dressing-down from his political master.
But David Cameron is rapidly winning a reputation as the most laid-back Prime Minister of modern times. A denizen of No 10 describes him as the sort of man who calculates exactly how little work he needs to do to be able to scrape a First at university while still having enough time to play tennis.
This is an endearing character trait in a friend – Cameron would be much more fun as a holiday companion than Gordon Brown or Margaret Thatcher. But in a Prime Minister, it can be dangerous. And it can also be demoralising. One minister confessed to me recently that he has no idea what Cameron thinks about his policies and would love more direction and guidance from No 10.
Cameron's predecessors had their own flaws, but they were all completely on top of their briefs. If anything, Brown went too far the other way; he micromanaged his ministers, to their fury. Blair turned a scorching focus on underperforming departments when they needed it. Major was too busy firefighting on Europe to do much else; but Thatcher was formidable. I remember her once being asked out of the blue, at a private lunch, what she thought about Mozambique. Nothing in particular was going on in Mozambique, so it was as obscure a question as you could imagine. But she expatiated at length about this faraway country of which the rest of us knew virtually nothing.
Cameron, by contrast, prides himself in playing the non-executive chairman's role to his Cabinet ministers' CEOs. He delegates as much as he can – often too much, as the NHS farrago has shown. This may seem terrific to confident ministers who want to run their empire unencumbered by any Downing Street oversight. But it makes him particularly vulnerable to the McKillop/Goodwin problem.
In opposition, Cameron promised not to replicate Labour's "sofa government". He also promised to cut down the number of ministerial special advisers. That was a mistake. Ministers need political advice from outside the Civil Service, and they need allies in pushing their agenda through their departments. What it led to was Fox having an informal adviser instead, with no security clearance, working in an unpredictable, freelance way. Not so much "sofa" as "flatshare" government. And this happened because no one was, in the end, able or willing to stand up to Fox. Brennan didn't stop it happening. If Cameron didn't know what was going on, he should have. And if he did know, he should have told Fox at the time that what he was doing was unacceptable.
Sir Tom McKillop and the RBS board were culpable for not standing up to Sir Fred Goodwin, with disastrous consequences both for the bank and the British economy. The Prime Minister is culpable for not paying more attention to what was going on at the Ministry of Defence. He knew his Defence Secretary was reckless and impetuous. He knew Fox considered himself above the normal rules. And he knew Fox had a reputation as a bully who didn't listen to others. All the ingredients were there for last week's debacle. One man could – and should – have stopped it.