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2009 U. Ill. L. Rev. 237 (2009)
Unconscious Bias and the Limits of Director Independence

handle is hein.journals/unilllr2009 and id is 239 raw text is: UNCONSCIOUS BIAS AND THE LIMITS OF DIRECTOR INDEPENDENCE Antony Page* Corporate directors make difficult decisions: How much should we pay our CEO? Should we permit a lawsuit against a fellow direc- tor? 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 di- rectors 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 di- rectors either do not have these preferences or can make decisions without being affected by them. Similarly, independent directors act- ing 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 fre- quently 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, re- gardless of directors' good faith, unconscious and, to a significant ex- tent, uncontrollable cognitive processes will prevent the directors' de- cisions 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 solu- tions, including heightened judicial scrutiny, expanded roles for other decision makers, and changed decision-making processes. Associate Professor and John S. Grimes Fellow, Indiana University School of Law- Indianapolis. J.D., Stanford Law School; M.B.A., Simon Fraser University; B.Comm., McGill Univer- sity. I would like to thank Professors Amitai Aviram, Larry Ribstein, Joan Heminway, Cynthia Wil- liams, and participants at the Midwestern Law & Economics Association 2005 conference, American Psychology Law Society 2006 conference, and colloquia at University of Illinois, Indiana University, and Stetson University. In addition, Court Farrell, Elizabeth Ellis, and Rachel Rinehart provided dili- gent research assistance. I would also like to thank Christopher Anderson, Amberlee Cook, Gerald Meyer, Alicia Weis, and Neil Manzullo of the University ofllinois Law Review.

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