Unconscious Bias and the Limits of Director Independence

Corporate directors make difficult decisions: How much should we pay our CEO? Should we permit a lawsuit against a fellow director? Should we sell the company? Directors are legally obligated to decide in good faith based on the business merits of the issue rather than extraneous considerations and influences. Naturally, some directors may have preferences, or even biases: Our CEO, my colleague and friend, deserves a lot; The company should not sue my fellow board member; We should not sell, because after all, I would like to remain a board member. But the courts presume that independent directors either do not have these preferences or can make decisions without being affected by them. Similarly, independent directors acting in good faith are likely to believe that they are either unbiased or have overcome their biases. Based on a synthesis of more than two decades of social psychology research, this article argues that frequently the courts’ presumption and the directors’ belief will be wrong. First, directors are likely to have preferences, even though they sometimes will not be consciously aware of them. Second, regardless of directors’ good faith, unconscious and, to a significant extent, uncontrollable cognitive processes will prevent the directors’ decisions from being unaffected by their preferences. Given this serious flaw in the conception of independent directors’ decision-making ability, the Article briefly evaluates several legal and procedural solutions, including heightened judicial scrutiny, expanded roles for other decision makers, and changed decision-making processes

Revisiting the Causes of the Financial Crisis

Much has been written on the legal causes of the financial crisis and its aftermath, often referred to as the Great Recession. Presumably the debate will continue for many years to come, much as scholars continue to debate the causes of the Great Depression. Lost, however, in the descriptions of arcane laws and complex derivative financial products, is a relatively brief and straightforward account of the crisis and its most likely causes for interested lawyers, law students, or graduate students who are not specialists and do not want to become specialists. This Essay, based on a presentation at the Indiana Law Review\u27s 2013 Symposium, Law and the Financial Crisis, aims to provide such an overview

New Corporate Forms and Green Business

You want to start a business: not just an ordinary business, producing ordinary social benefit, but a dual-mission business that will both make a profit and benefit the environment. This green business, you expect, will sometimes face trade-offs between the missions, in the sense that sometimes owners\u27 wealth and profit will have to be sacrificed to pursue environmental benefits. You\u27re optimistic, in that you hope the business will find outside investors and will scale up easily. Moreover, you don\u27t want to lie or even dissemble about your motives or about the business\u27s actions. You want to be both authentic and transparent. This Article looks at whether and how law, by means of recently enacted corporate organizational forms-benefit corporations, flexible purpose corporations and social purpose corporations---can help

The astacin metalloprotease moulting enzyme NAS-36 is required for normal cuticle ecdysis in free-living and parasitic nematodes

Nematodes represent one of the most abundant and species-rich groups of animals on the planet, with parasitic species causing chronic, debilitating infections in both livestock and humans worldwide. The prevalence and success of the nematodes is a direct consequence of the exceptionally protective properties of their cuticle. The synthesis of this cuticle is a complex multi-step process, which is repeated 4 times from hatchling to adult and has been investigated in detail in the free-living nematode, Caenorhabditis elegans. This process is known as moulting and involves numerous enzymes in the synthesis and degradation of the collagenous matrix. The nas-36 and nas-37 genes in C. elegans encode functionally conserved enzymes of the astacin metalloprotease family which, when mutated, result in a phenotype associated with the late-stage moulting defects, namely the inability to remove the preceding cuticle. Extensive genome searches in the gastrointestinal nematode of sheep, Haemonchus contortus, and in the filarial nematode of humans, Brugia malayi, identified NAS-36 but not NAS-37 homologues. Significantly, the nas-36 gene from B. malayi could successfully complement the moult defects associated with C. elegans nas-36, nas-37 and nas-36/nas-37 double mutants, suggesting a conserved function for NAS-36 between these diverse nematode species. This conservation between species was further indicated when the recombinant enzymes demonstrated a similar range of inhibitable metalloprotease activities

The sensory amphidial structures of Caenorhabditis elegans are involved in macrocyclic lactone uptake and anthelmintic resistance

Parasitic nematodes represent formidable pathogens of humans, livestock and crop plants. Control of these parasites is almost exclusively dependent on a small group of anthelmintics, the most important of which belong to the macrocyclic lactone class. The extensive use of these drugs to control the ubiquitous trichostrongylid parasites of grazing livestock has resulted in the emergence of both single and multi-drug resistance. The expectation is that this resistance will eventually occur in the human parasites such as the common and debilitating soil transmitted nematodes and vector-borne filarial nematodes. While the modes of action of anthelmintics such as ivermectin (IVM), have been elucidated, notably in the model nematode Caenorhabditis elegans, the molecular nature of this resistance remains to be fully determined. Here we show that the anterior amphids play a key role in IVM uptake and mutations in these sensory structures result in IVM resistance in C. elegans. Random genetic mutant screens, detailed analysis of existing amphid mutants and lipophilic dye uptake indicate that the non-motile ciliated amphid neurons are a major route of IVM ingress; the majority of the mutants characterized in this study are predicted to be involved in intraflagellar transport. In addition to a role in IVM resistance, a subset of the amphid mutants are resistant to the non-related benzimidazole class of anthelmintics, raising the potential link to a multi-drug resistance mechanism. The amphid structures are present in all nematodes and are clearly defined in a drug-sensitive strain of Haemonchus contortus. It is predicted that amphidial drug uptake and intraflagellar transport may prove to be of significance in the development of single and multi-drug resistance in the nematode pathogens of veterinary and human importance

The Role of Social Enterprise

A social enterprise operates a business in a manner intended to increase social welfare more than conventional businesses in the same sector. This notion of “social enterprise” was pioneered by nonprofit organizations seeking to advance their charitable missions through revenue-generating commercial activity, instead of relying on charitable donations. With increasing frequency the term is applied to for-profit business ventures whose founders seek to both address social problems while also generating acceptable returns for owner-investors. The article examines the notion of for-profit social enterprise, and explains how such entities may better achieve social goals than nonprofits engaged in revenue-generating commercial activity, most notably by expanding a business’s access to capital and talent. The article also addresses what some have described as the “legacy problem” – the concern that for-profit social enterprises will not sustain their social missions after the founding social entrepreneur’s exit or loss of enthusiasm. Such concerns, the authors argue, reflect a “nonprofit lite” perspective, which sees the main challenge of social enterprise law as increasing the resources available to what are essentially nonprofit organizations, i.e., entities that are explicitly committed to generating social value in perpetuity. The authors favor an approach that is grounded in the broader ambitions of social entrepreneurship, which is to increase social welfare by transforming markets and preferences in a way that goes well beyond a particular enterprise’s activities. The for-profit social enterprise itself may be transitional and need not survive in order to achieve large-scale social change

Freezing out Ben & Jerry: Corporate Law and the Sale of a Social Enterprise Icon

Companies with social missions are frequently bought by larger, more conventional profit-seeking firms and just as frequently accused of “selling out.” Ben & Jerry’s Homemade Inc. is perhaps the leading example: its takeover by international conglomerate Unilever is an oft-repeated cautionary tale of the negative proclivities of the publicly-traded corporate form and profit-maximizing corporate law. Contrary to conventional wisdom, however, corporate law did not compel the sale, or sell-out, of Ben & Jerry’s. This familiar account omits a critical part of the narrative -- the company and its founders had established impressive anti-takeover defenses that, when pressed, the board declined to test. The Ben & Jerry’s story demonstrates that a well designed corporate structure can be suitable for social entrepreneurs seeking to pursue both profits and a social mission. Moreover, handwringing by progressives over the sale of social enterprise icons may be misguided, as such transactions may enable these firms to create more social value than they could independently