This Article seeks to use social science research to better understand why these and other corporate governance problems persist. One reason may be that boards are biased as to how they respond to these issues. Social science research on risk perception informs us that individuals’ “preferences among different types of risk taking (or avoiding), correspond to cultural biases—that is, to worldviews or ideologies entailing deeply held values and beliefs defending different patterns of social relations.” Cultural theorists have identified four competing worldviews: communitarian, individualistic, hierarchical, and egalitarian. The communitarian and individualistic worldviews are at opposite ends of a spectrum measuring the degree to which an individual’s self-identity and preferred social relations derive from membership in a group...Moreover, this Article argues that directors’ decision-making may involve risk-taking with respect to matters that may carry a social charge...Further, the article presents two strategies to neutralize the impact of CIP risk assessment on corporate decision-making. One possible strategy may be that courts give greater scrutiny to directors’ decisions that particularly may be prone to risk assessment bias...Further, the Article suggests that although CIP cognition affects all directors, non-management directors may be better situated (after education) than management directors to provide a voice on the board to counteract the effects of CIP cognition...This Article does not recommend that non-management directors are the solution to the problem of CIP risk assessment on corporate boards. Also, it does not attempt to take a position about the proper role for non-management directors. This Article suggests that, indeed, under our current corporate governance system, CIP risk assessment bias may be a difficult problem to solve. There may be very few directors who are capable of exercising unbiased judgment in any directorial role.
Burch, Regina F.
"The Myth of the Unbiased Director,"
Akron Law Review: Vol. 41
, Article 4.
Available at: http://ideaexchange.uakron.edu/akronlawreview/vol41/iss2/4