Former Medtronic CEO and Minneapolis resident Bill George believes that the financial market meltdown was the result of “sub-prime leadership” at many of the nation’s failed financial institutions.

As a member of the board at Goldman Sachs, George occupies a ring-side seat in observing the financial market turmoil. Currently a teacher at the Harvard Business School, he also believes a culture split within business schools is feeding short-term thinking within the financial industry.

Also on the board of Exxon Mobil, George brings a global perspective and broad business experience to his writing, teaching and speaking as well as a blunt and outspoken perspective. Recently in town to promote his newest book, “7 Lesson for Leading in Crisis,” George shared with me his perspective on, among other topics, the recent market meltdown, rethinking risk and failures of leadership among. Following are excerpts from Parts 1 and 2 of a recent interview in my newsletter, RiskRewardNews.com.

On failed leadership and risk:
“The biggest risk corporations take is to have weak board governance and the wrong leaders at the helm. We thought we could take risk out, but we failed to assess the human risk and the fact the models didn’t reflect reality. Typically, they’re history-based, and the history was way too short, five to 10 years.”

“I’ve never believed in institutional risk, and you don’t see me sitting on any boards — Goldman becomes the closest to it — that’s taking significant institutional risk. It’s a destructive act, not responsible, to put the whole company at risk. Think of the worst thing that could actually happen that could destroy the place. Like at Medtronic -- what if we had a software glitch ... that went across all of our products, it could destroy the company and harm people dramatically.”

The problems within the financial industry “have long roots. So you can’t look at [current Citigroup CEO] Vikram Pandit you can barely look at [Pandit’s predecessor] Chuck Prince. You have to go way back. [Former CEO] Sandy Weill’s the one who created this culture. He’s not a bad guy, but he didn’t create a culture of sound risk management.”

On the culture split within business schools:
“There is a split in almost every business school ... The values course is over here, the finance course is over there and never the twain shall meet. I don’t worry about the people going into the corporate side, going to work for Procter & Gamble or General Mills. I worry about people motivated by short term gratification to make a lot of money.”

“But I think [the current market turmoil] will be a wonderful crucible experience for this new generation of business leaders ... to realize the world is not about picking up gold lying in the streets ... to realize that models or the latest financial techniques aren’t everything. You’ve got to build yourself to be a leader. To paraphrase [GE CEO] Jeff Immelt; there’s no way you can truly prepare to become a CEO. What you’ve got to do is learn how to learn from your experiences and quickly adapt.”