Vanderbilt Law Review

First Page



This Article begins by briefly describing the role of the board both in law and in practice. Part II explores the distinction be- tween consensus and authority as modes of institutional decision- making. As hierarchical institutions, corporations rely far more heavily on authority than on consensus. Yet, at the apex of the hierarchy is a collegial body that functions mainly by consensus.

Part III is the core of the Article. In order to evaluate corporate law's preference for collective decisionmaking, we need to know whether group decisionmaking is superior to that of individuals. A wealth of experimental data suggests that groups often make better decisions than individuals. Even more strikingly, the conditions under which groups outperform individuals in laboratory settings have important similarities to board decisionmaking.

It is surprising that corporate law scholarship has largely ignored the basic question from which this Article takes its title: Why a board? Part III argues that the board's existence follows logically from the evidence on group decisionmaking. Curiously, corporate law scholarship has almost uniformly ignored this important body of research. Part IV asks whether the legal regimes governing boards are well-designed to encourage optimal board behavior. Two legal subregimes are examined. First is the seemingly formalistic statutory rules governing board of directors processes in light of the evidence on group decisionmaking. Those rules were the original impetus for this Article. Are they mere historical anachronisms-creatures of a long-dead era of formalism or do they have an efficiency rationale? Part IV contends that most, if not all, statutory rules on board formalities turn out to be consistent with the learning on how groups can best make decisions. Second is the legal standard governing review of judicial decisions. As we shall see, the adverse consequences of judicial review for effective team functioning turn out to be a partial explanation for the business judgment rule.