The Human Nature of Corporate Boards: Law, Norms and the Unintended Consequences of Independence and Accountability

32 Pages Posted: 18 Sep 2000

Date Written: September 2000

Abstract

Recent empirical work has puzzled over the lack of a positive correlation between the presence of a majority of outside directors on a corporate board and measures of firm performance. Drawing on work in social psychology and group behavior, this paper extends previous work to offer plausible explanations for the value-enhancing contributions of a "balanced" board. These possibilities include insider countering of outsider biases, the promotion of internal middle management interests, and the reduction in CEO influence activities that distort communications and interfere with trust. The paper then turns to use these same (and related) insights to point out some unintended behavioral consequences of recent efforts to increase the liability exposure of directors and make them more accountable. The paper concludes by addressing the connection between its analysis and the current "law versus norms" debate in corporate and securities law.

Suggested Citation

Langevoort, Donald C., The Human Nature of Corporate Boards: Law, Norms and the Unintended Consequences of Independence and Accountability (September 2000). Available at SSRN: https://ssrn.com/abstract=241402 or http://dx.doi.org/10.2139/ssrn.241402

Donald C. Langevoort (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States
202-662-9832 (Phone)
202-662-9412 (Fax)

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