Anti-Social Norms, Risky Behavior
Corporate Boards: Managers of Risk, Sources of Risk, Robert W. Kolb & Donald Schwartz eds., Wiley-Blackwell, 2009
Posted: 9 Mar 2009
Date Written: March 7, 2009
Abstract
To understand how boards can serve as both managers and creators of risk, a prerequisite would be to have a satisfactory framework within which to conceptualize board behavior. Unfortunately, such a basic structure is lacking. This chapter explores this curious anomaly and proposes that the intersection of boards and risk can only be understood through a counter-intuitive application of sociological norms. Only once existing misconceptions are set aside can reform follow.
The argument is structured in three parts. Part I explores the limitations of conventional models: neoclassical economics, industrial organization (IO), and institutional economics. It also explores why the behavioral project - whether expressed through behavioral economics or organizational behavior (OB) - is incomplete. Based on the notion of "organizational behavioral economics," Part II then proposes a structure within with to understand board behavior using the concept of norms. Finally, Part III presents suggestions for reform, with an emphasis on enhancements to corporate and criminal law.
Keywords: boards, risk, norms, behavioral economics
JEL Classification: D21, D70, D81, K22
Suggested Citation: Suggested Citation