Friday, December 4, 2020

Trees' Company

My wonderful colleagues, Bill Tomlinson (University of California, Irvine), Rebecca Black (University of California, Irvine), M. Six Silberman (IG Metall), Yaqi Xie (University of California, Irvine)Paramdeep Singh Atwal (University of California Irvine), and I just published an article entitled "Judging Corporate Directors by the Companies They Keep: Results from an Interactive Simulation About the Motivations of Corporate Directors", in the University of Pennsylvania Journal of Law & Public AffairsHere is the abstract:

The directors of major corporations are hugely powerful in charting the course of industrial civilization. Who selects those directors, and how those directors make decisions, are therefore both topics of critical importance. Various legal frameworks, such as the Accountable Capitalism Act currently under consideration by the United States Congress, have proposed that shareholders and/or employees should have a say in the director-selection process. We conducted an interactive simulation experiment, based on the Accountable Capitalism Act and Delaware corporate law, with human participants acting as three different types of directors: shareholder-selected directors, employee-selected directors, plus a third, novel form of director, “environment-selected directors.” In this paper, we integrate quantitative and qualitative findings from this experiment to provide novel results about the behaviors of these participants, and the deeper motivations underlying their behaviors. We found a range of potential motivations that could affect directors’ behavior, including obeying regulations, being responsive to changes unfolding in the world, feelings of obligation to the stakeholders that selected them, and pre-existing biases toward or against particular stakeholders. We also found a strong penchant on the part of directors to engage in balancing of interests, even when instructed to favor only one interest, suggesting tension between existing corporate law and the preferences of individual directors. By providing experimental evidence into the motivations that may influence such directors’ behaviors, and in particular exploring the possibility of environment-selected directors, this paper seeks to lay the legal groundwork for broader stakeholder representation on corporate boards.

This article complements "'Environment-Selected Directors': An Interactive Simulation Experiment of Environmental Representation on Corporate Boards", which was published in the summer of 2020 in Ecological Economics, which I previously discussed on August 1, 2020, on Lexvivo in "The Nature Of The Firm".