11.4.5 Prevention in companies

The groupthink theory by Janis (1971) is based on several cases in the past, which originate from political decision-making groups. O’Connor (2003) applied the theory to the case of the collapse of Enron. From her analysis of Enron, she derived certain lessons and recommendations. Furthermore, she comments on proposals of corporate governance reform in the United States from a groupthink perspective. Due to O’Connor’s focus on companies, her recommendations and comments might be better suited for applying to companies than Janis’ recommendations. The recommendations are described below and are grouped according to the three building blocks of independence: person, composition/structure and preconditions. The person building block describes recommendations about stronger independence criteria. The composition/structure building block describes separate NED meetings, tasks of board committees, maximum tenure and diversity. The preconditions building block describes a prohibition of CEO duality, a ban on related party transactions and evaluations. The recommendations are compared with the current situations in the United Kingdom, the Netherlands and Sweden in order to assess groupthink prevention in these legal frameworks.