| The director is not merely a rational “economic person”. His decision is the mixture of rationality and emotion. It’s natural and known that they may practise favoritism in making corporate decisions in case of interest conflict. However, even there is no such interest conflict, they may still fail to stick to the supremacy of corporate interest and stockholders’ interest in decisions involving their fellow directors and executives. Instead they may unconsciously follow the trail of acquaintanceship, affection and face, and put their colleagues’ interests before the interests of the corporation and stockholders. This is the structural bias of the board, also known as the board “decision disease”, which has been ignored by the rationality decision paradigm so far. In order to expound the anomaly of the “directors’ mutual shield”, we must overcome the defects of traditional corporation law in its complacency and conservation as well as its ignorance of emotional influence in director decision-making process, and borrow a lessen from such emerging disciplines as behavioral economics and social psychology in absorbing their research outputs and analytic tools so as to open the black box of director’s decision flowing from emotion. According to social psychology, directors may unconsciously shield their fellow directors and executives due to situational issues like reciprocity, group favoritism and group thinking. The behavioral economics further reveals that they may do so unconsciously due to intrinsic reaction upon mere exposure effect, framing effect, ticking together and terrified effect, which expounds its formation mechanism from the aspect of brain’s working process. Obviously, such structural bias belongs to improper board behavior which may become more dangerous to some degree due to its concealment and fraudulency. How to make it accountable? The problem is that the loyalty path under the rationality paradigm is too harsh, and the care path is too deferential. The intermediate review standards dancing to their tunes are also helpless. The good faith path may meet the institutional demands of the director’s accountability under structural bias. The examination of the substantive reasonableness of director’s decision may urge them to look before leap, so the accountability gap may be filled up and the effectiveness of accountability in such intermediate areas may be strengthened. |
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