Behavioural aspects of the development of corporate norms, laws and governance codes their content and compliance procedures

The overall aim of this project is to investigate behavioral aspects of the development of corporate norms, laws and governance codes their content and compliance procedures. The proposition is that corporate regulation in all its forms should begin with an exploration of what companies are capable of; both the positive and negative.


This investigation is timely because it is only in the last few decades that behavioral elements have been added to various theoretical positions. For example finance has only recently taken on board findings in cognitive psychology about human behavior in risk assessment. This addition of the behavioral to the previously rational has been labeled "behavioral finance".


This research project aims to look at various behavioral aspects of companies and to locate relevant theories that could enhance understanding of the regulation of corporate activity. For instance, control and disclosure of directors' remuneration packages has been advocated as a way of controlling directors' behavior. This assumes that if directors' contracts are written with appropriate incentives, the directors' personal interests can be aligned with those of the company. However, behavioral theories indicate that directors are likely to have intrinsic motivation, a force shaping behavior that means some activities are undertaken "for their own sake" and that blunt incentives by "crowding out" this intrinsic motivation may be counterproductive.


Three areas remain to be addressed in the period of leave:

1. The first part of the project is concerned with how much directors need to trust each other and when they need to be sceptical- and how these demands are reflected in their legal responsibilities.

2. The second part of the project is concerned with the issue of how a company thinks, what it knows and how it can be reckless. If a company is a person how does, and could, the law determine that person's intent?

3. The third area to be investigated is whether the legal protection given by incorporation influences the behavior of companies, especially in non-routine decisions where the company cannot draw on previous experience. This might be seen as decision-making under true uncertainty which has been shown to produce different behaviors from decision-making under risk, where outcomes can be estimated.