Wilful Blindness: Why We Ignore the Obvious at Our Peril [Paperback]. Margaret Heffernan
Simon Schuster [Book review.]
This book would very much interest Adrian Sanders and Tom Watson. Rupert Murdoch was famously asked, “Are you familiar with the term “wilful blindness“?”
A definition of it, as stated in Heffernan’s book on wilful blindness, is supplied by Judge Simeon Lake in summing up the ENRON case, a corporate scandal which shook America and beyond: “You may find that a defendant had knowledge of a fact if thou find that the defendant deliberately closed his eyes to what would otherwise have been obvious to him. Knowledge can be inferred if the defendant deliberately blinded himself to the existence of the fact“.
In English law, the notion of a separate corporate personality has been pervasive, and the law has grappled whether or not the company is the proper defendant. Since the seminal case in the House of Lords, Salomon v Salomon [1897]. it has been held that the body corporate has a separate legal personality. However, it is long been established that the Courts will not allow the Salomon principle to be used as an engine of fraud, for example Gilford Motor Company Ltd v. Horne [1933]. In a different guise, the legislature here has been concerned as to whether BSkyB is a ‘fit and proper person’ to hold a broadcasting licence, but the sting in the tail here. High quality global journalism requires investment. According to a recent article in the Financial Times, US Department of Justice is also investigating whether News Corp breached the Foreign Corrupt Practices Act (FCPA). Mike Koehler, a professor specialising in FCPA cases, has apparently opined that US regulators might be asked to consider whether they turned a blind eye over alleged payments to public officials.
The idea of the body corporate having a personality capable of criminal activity, such as fraud or manslaughter, is a well established one, and provides for a compelling look at the corporate psychology. The directors have a duty to maximise the success of the company, but it is possible that there might be wilful blindness on the part of companies. This provides the most interesting narrative of Heffernan’s clever book. Heffernan considers very convincingly how the human brain can cope with conflicting views, a notion called ‘cognitive dissonance’. The term “cognitive dissonance” is used to describe a feeling of discomfort that results from holding two conflicting beliefs. Heffernan in my view has grasped the full impact of the relevance of this to the corporate psychology, and hence potentially its behaviour. Leon Festinger proposed that the greater the discomfort, the greater the desire to reduce the dissonance of the two cognitive elements (Harmon-Jones & Mills, 1999), and dissonance theory suggests that if individuals act in ways that contradict their beliefs, then they typically will change their beliefs to align with their actions (or vice-a-versa). You can easily read between the lines to see how a successful corporate might find itself in a situation like this, in a context such as phone hacking, and insights into the allegations about phone hacking have yet to be fully explored here in the English law.
Heffernan gives countless convincing examples of ‘wilful blindness’ from corporates. For example, the book makes reference to the collapse of Lehman Brothers, where it is alleged concluded that the failed investment bank had exploited its relationship with Linklaters to green light an accounting practice that kept billions of dollars off its balance sheet. This is reported in ‘The Lawyer’ here. Heffernan argues that, ‘in the desire to boost their balance sheet, such manoeuvres wilfully blinded their organisations to their own vulnerabilities.’ However, for me Heffernan’s most interesting analysis was why wilful blindness may be a form of shortcut, or as we know it in the trade of cognitive neuroscience, ‘a cognitive heuristic’. In a nutshell, we have 1 000 000 000 000 000 neurones approximately in a giant supercomputer, and we, as humans, have never been able to work out the brain is able to form so many higher-order differential equations, and once it does so, how it solves them so accurately. Many neuroscientists like me believe that shortcuts are the only way the brain can get round this. Heffernan directly argues that CEOs use such wilful-blindness cognitive shortcuts as a mechanism, when referring to the Deepwater Horizon disaster. According to Heffernan, Manzoni, a renowned energy supremo, said, “I believe nobody knew of the level of risk at Texas City because, if they had known, we would have taken different and substantively different actions.” Heffernan comments, pretty innocently, that: “Manzoni’s argument is intriguing because he’s using a logical shortcut: assuming that there could not have been a problem because, if there had been, someone somewhere would have taken action. Since no one took action, thee problem could not have existed.”
‘Wilful blindness’ is an elegantly written book which successfully combines cognitive neuroscience and the law, within the context of international contemporary corporate management. It will also appeal to law students and corporate trainees, and may even appeal to CEOs and the people who cross-examine them in formal hearings!
