Last week I blogged (here) that if we assume a corporate board’s duty of oversight includes monitoring risk exposure, then it should constitute a per se violation of that duty for a board to rule on a particular risky strategy without understanding the nature of the risk. Stephen Bainbridge disagreed (here) ....
... I don’t disagree with any of Bainbridge’s propositions. However, I believe they are all subject to exceptions, and a failure to demonstrate a proper understanding of relevant risk exposure may constitute such an exception. To begin with, we want to encourage appropriate risk-taking, not recklessness. One cannot optimize risk exposure without understanding the complexities of the particular strategy.
via www.theracetothebottom.org
The debate rolls on.
