Bias in the boardroom
Int. J. of Behavioural Accounting and Finance
Inderscience Enterprises Ltd.
This paper investigates the impact of social and psychological factors on the quality of boardroom decision-making. It is argued that bias in the boardroom undermines the monitoring function of boards, with a particularly negative impact on the functional independence of non-executive directors. The study is informed by a two-year participant observer case study of the governance failures of a housing association that experienced significant adverse performance resulting in its near collapse. The case study adds insights to the theoretical discussion by highlighting the pervasive nature of bias in boardroom proceedings. The paper closes by exploring means to minimise the impact of bias. Keywords: behavioural accounting and finance; boardroom decision-making; non-executive independent directors; bias mitigation; case study; bias.
Invited comment on the consultation document of the ICSA Review of the Higgs Guidance on behalf of the FRC - Improving Board effectiveness. Author's version of October 2010. Final version published in International Journal of Behavioural Accounting and Finance
Vol. 2, pp. 238 - 251