THE BUSINESS JUDGMENT RULE (PART 1)

The business judgment rule as optimal standard of care

Why agents need discretion: The business judgment rule as optimal standard of care∗

Should managers be liable for ill-conceived business decisions? One answer is given by U.S. courts, which almost never hold managers liable for their mistakes. In this paper, we address the question in a theoretical model of delegated decision making. We find that courts should indeed be lenient as long as contracts are restricted to be linear. With more general compensation schemes, the answer...

Running head: RULES IN JUDGMENT 1 Testing learning mechanisms of rule-based judgment

Weighing the importance of different pieces of information is a key determinant of making accurate judgments. In social judgment theory, these weighting processes have been successfully modeled with linear models. How people learn to make judgments has received less attention. Although the hitherto proposed least mean squares or delta learning rule can perfectly learn to solve linear problems, ...

The Business Rule Approach

Today, a business faces fast changing environments which require frequent adaptations of parts of the business. These adaptations of the business are usually delayed to a great extent by the entailed modification of the business’s applications. Consequently, the business looses much time and money with adapting the applications’ behaviour and therefore cannot keep pace with changing environment...

Does Social Judgment Diminish Rule Breaking?

We experimentally investigate the extent to which social observability of one’s actions and the possibility of social non-monetary judgment affect the decision to engage in rule breaking behavior. We consider three rule breaking scenarios — theft, bribery and embezzlement — in the absence of any formal enforcement mechanism. By involving a student sample characterized by cultural heterogeneity ...