Boards of Directors’ Sanction Judgments: The Effect of Situational Factors.

• In Event: Breakfast and Research & Education Table Forum
  In Roundtable Session: Table 13: Board of Directors' Judgment

Abstract

This study investigates the influence of situational factors on sanction judgments by members of boards of directors. Board members guide controls processes, including sanction guidance for internal and external rules violations. This study is the first to investigate the decisions of such members in the presence of mitigating circumstances. Based on punishment theory regarding deterrence and retribution, as well as literature on empathy and judgement, an experiment analyzes how variation in history of similar incidents, compensation structure, and reason for violation impacts directors’ sanction recommendations. Findings suggest board members focus on history of violations (repeat or first-time offender) and are not influenced by whether the individual received financial benefit or by empathetic situations. This holds true for both sanction type and amount of monetary sanction. Participants emphasize warnings for a first-time offender and fines for a repeat offender. Implications future research and boards relating to punishment guidance are discussed.

Authors

• Joseph M Wall, Marquette University

• Jodi Lynn Gissel McDowell, Marquette University