Facilitating Successful Failures

63 Pages Posted: 14 Mar 2013 Last revised: 18 Apr 2013

See all articles by Michelle M. Harner

Michelle M. Harner

University of Maryland Francis King Carey School of Law

Jamie Marincic Griffin

University of Michigan at Ann Arbor

Date Written: 2013


Approximately 80,000 businesses fail each year in the United States. This article presents an original empirical study of over 400 business restructuring professionals focused on a critical, arguably contributing factor to these failures - the conduct of boards of directors and management. Anecdotal evidence suggests that management of distressed companies often bury their heads in the sand until it is too late to remedy the companies’ problems, a phenomenon commonly called “ostrich syndrome.” The data confirm this behavior, show a prevalent use of loss framing, and suggest trends consistent with prospect theory. The article draws on these data and behavioral economics to examine the genesis and contours of this problem. It then discusses potential changes to applicable law and introduces a new “meet and confer” process for encouraging timely restructuring negotiations. The meet and confer process is designed to promote meaningful changes in management conduct and to facilitate more “successful failures.” Policymakers should adopt regulations fostering that mentality, rather than rewarding fear or ignorance in the face of failure.

Keywords: management, financial distress, restructuring

Suggested Citation

Harner, Michelle M. and Marincic Griffin, Jamie, Facilitating Successful Failures (2013). Florida Law Review, Vol. 66, 2014, Forthcoming; U of Maryland Legal Studies Research Paper No. 2013-14. Available at SSRN: https://ssrn.com/abstract=2233348

Michelle M. Harner (Contact Author)

University of Maryland Francis King Carey School of Law ( email )

500 West Baltimore Street
Baltimore, MD 21201-1786
United States
410-706-4238 (Phone)

Jamie Marincic Griffin

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

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