Toward a behavioral theory of boards: identifying and assessing the severity of directors’ conflict of interests

Often board independence is defined in terms of conflict of interest (CoI), which, when “realized” or “activated”, results in board opportunistic behavior. But the term “CoI” is used in many different and often inconsistent ways. Although a significant amount of research has emphasized the importance of board independence, there is a lack of studies investigating the different types of CoI (actual, potential and apparent CoI) that could affect both the board members behavior (impairing their independence) - even to those who are (often only formally) independent - and outsider observers’ trustworthy in respect of board members behavior. We try to fill this theoretical gap by identifying the directors’ CoI and suggest some criteria for assessing its severity. Identifying and assessing directors’ CoI is extremely important when we approach to the behavioral theory of boards, because CoI tend to impair directors’ judgment and will.