Communication and Decision-Making in Corporate Boards
Boston College - Carroll School of Management
WFA 2011 Santa Fe Meetings Paper
EFA 2011 Stockholm Meetings Paper
Rock Center for Corporate Governance at Stanford University Working Paper No. 95
Time constraints, managerial power, and reputational concerns may impede board communication. This paper develops a model in which board decisions depend on the effort directors put into communicating their private information to other board members. I show that both directors' biases and their reluctance to deviate from other directors encourage them to communicate more effectively. This implies, for example, that open ballot voting can be optimal, even though it induces directors to disregard their information and conform their votes to other directors. It also suggests that boards with fully independent directors may be less effective than boards in which some directors' interests conflict with shareholders' interests. The analysis has implications for executive sessions, boardroom transparency, and committees.
Number of Pages in PDF File: 55
Keywords: board of directors, collective decision-making, communication, executive sessions, open and secret ballot voting
JEL Classification: D71, D72, D74, D82, D83, G34, K22working papers series
Date posted: November 21, 2010 ; Last revised: July 25, 2012
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