Loss Framing and Corporate Boards

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Richard W. Painter

Richard Painter, who has written about the psychology of ethical decision-making in various contexts (e.g., “The Psychology of the Coverup” in Getting the Government America Deserves: How Ethics Reform Can Make a Difference and Irrationality and Cognitive Bias at a Closing in Arthur Solmssen’s The Comfort Letter), has an interesting post at Legal Ethics Forum entitled, “Do declassified boards put corporate managers in a ‘loss frame’ that encourages financial, legal and ethical risk taking?” (Loss aversion, a foundational concept in behavioral economics, in addition to making casinos rich, helps to explain unethical behavior). In the corporate context, Professor Painter calls for empirical research to determine whether the methodology of board elections influences law compliance — a reminder of the importance of, and need for, applied research on the role of psychology in ethical decision-making for legal and non-legal actors (for another excellent discussion of the role of behavioral ethics on corporate directors, see Antony Page’s article in the Illinois Law Review, Unconscious Bias and the Limits of Director Independence).

[edited: 1/17/15 8:52pm]

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