Corporate Governance, Risk Management, and the Financial Crisis - An Information Processing View

33 Pages Posted: 12 Dec 2010 Last revised: 2 Nov 2013

See all articles by Michael Pirson

Michael Pirson

Fordham University - Gabelli School of Business; Humanistic Management Network; Harvard University

Shann Turnbull

International Institute for Self-Governance; Sustainable Money Working Group; New Garden City Alliance

Date Written: December 11, 2010


Using an information processing perspective we identify two reasons why boards failed to manage risk well 1) board members did not get relevant information about risks incurred by management because they lacked control over information supply; 2) board members were not able to process such risk-related information and lacked incentives or power to influence managerial decision making. Based on insights from cybernetics and decision making theory, we suggest increasing the information processing and decision making capabilities on the board level, by including multiple stakeholders on multiple boards based on a division of labor and a division of power; this alternative structure we label network governance.

This paper is one of the few papers making actual recommendations based on systemic insight. Practitioners that agree with the analysis will be able to draw conclusions for their proper governance structure, especially when their businesses operate in increasingly complex environments. Regulators could equally learn from those recommendations and include basic insights generated in their regulatory frameworks.

Keywords: Corporate Governance, Complexity, Network Governance, Information Processing, Risk Management

JEL Classification: L20, M00, N00, K20

Suggested Citation

Pirson, Michael and Turnbull, Shann, Corporate Governance, Risk Management, and the Financial Crisis - An Information Processing View (December 11, 2010). Fordham University Schools of Business Research Paper No. 2011-003, Available at SSRN: or

Michael Pirson (Contact Author)

Fordham University - Gabelli School of Business ( email )

140 West 62nd Street
New York, NY 10018
United States

Humanistic Management Network ( email )

St. Gallen

Harvard University

1875 Cambridge Street
Cambridge, MA 02138
United States

Shann Turnbull

International Institute for Self-Governance ( email )

PO Box 266 Woollahra
Cell: +61418222378
Sydney, New South Wales 1350
+61293278487 (Phone)
+61280655905 (Fax)

SKYPE: shann.turnbull

Sustainable Money Working Group ( email )

Holyoake House
Hanover Street
Manchester, M60 0AS
United Kingdom

New Garden City Alliance ( email )

113 Guinness Court
London, UK, SE1 3TA
United Kingdom
+44 207 378 1902 (Phone)


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