Parochialism is defined as the “willingness to sacrifice self-interest for in-group members while neglecting or underweighing negative effects on outsiders, so that an out-group could lose more than the in-group gains from the sacrifice.”
As you read this paper think about how the concepts would apply to corporate governance, to conflicts of interests, as well as shareholder returns vs managerial greed.
Abstract (Via SSRN)
I discuss several forms of bias, or fallacious thinking, that lead to parochialism, that is, a willingness to sacrifice self-interest for in-group members while neglecting or underweighing negative effects on outsiders, so that an out-group could lose more than the in-group gains from the sacrifice. In the self-interest illusion, people fallaciously think that their contribution to their group comes back to benefit them and make their sacrifice worthwhile. This illusion is larger when an outgroup is affected, and it is specific to group benefits; it is unrelated to the desire to hurt another group out of sheer competition. A second bias is the tendency to de-personalize the individuals involved and think about the groups. This is reduced when people make analogous decisions about individuals. I suggest that approval voting — at least when both groups vote — can lead people to take the out-group into account. Omission bias, the preference for harming others through omissions rather than actions, is greater for out-group members. Parochialism can be moralized: people think of it as absolute and objectively moral, they are willing to impose it moralistically on others, and they consider the support of the in-group to be their duty as citizens. I conclude with suggestions for reducing the harmful effects of parochialism.