Communication and Decision-Making in Corporate Boards

Review of Financial Studies, Vol. 27, No. 5, May 2014

56 Pages Posted: 21 Nov 2010 Last revised: 24 Apr 2015

Nadya Malenko

Boston College - Carroll School of Management

Date Written: May 1, 2014

Abstract

Time constraints, managerial power, and reputational concerns can impede board communication. This paper develops a model where board decisions depend on directors' effort in communicating their information to others. I show that directors communicate more effectively when pressure for conformity is stronger, i.e., when directors are more reluctant to disagree with each other. Hence, open ballot voting can be optimal, even though it induces directors to disregard their information and conform their votes to others. I also show that communication can be more efficient when directors' preferences are more diverse. The analysis has implications for executive sessions, transparency, and committees.

Keywords: board of directors, collective decision-making, communication, executive sessions, open and secret ballot voting

JEL Classification: D71, D72, D74, D82, D83, G34, K22

Suggested Citation

Malenko, Nadya, Communication and Decision-Making in Corporate Boards (May 1, 2014). Review of Financial Studies, Vol. 27, No. 5, May 2014. Available at SSRN: https://ssrn.com/abstract=1712431 or http://dx.doi.org/10.2139/ssrn.1712431

Nadya Malenko (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

HOME PAGE: http://www2.bc.edu/nadya-malenko/

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