Corporate Board Composition, Protocols, and Voting Behavior: Experimental Evidence

FRB of Atlanta Working Paper No. 2000-10

48 Pages Posted: 13 Oct 2000

See all articles by Ann B. Gillette

Ann B. Gillette

Kennesaw State University - Michael J. Coles College of Business; Federal Reserve Banks - Federal Reserve Bank of Atlanta

Michael J. Rebello

University of Texas at Dallas - Naveen Jindal School of Management

Thomas H. Noe

University of Oxford - Said Business School; University of Oxford - Balliol College; Bank of Finland; European Corporate Governance Institute

Multiple version iconThere are 2 versions of this paper

Date Written: August 2002

Abstract

We examine voting by a board designed to mitigate conflicts of interest between privately informed insiders and owners. Our model demonstrates that, as argued by researchers and the business press, boards with a majority of trustworthy but uninformed "watchdog" agents can implement institutionally preferred policies. Our laboratory experiments strongly support this conclusion. Our model also highlights the necessity of penalties on insiders when there is dissension among board members. However, penalties for dissent appeared to have little impact on the experimental outcomes.

Keywords: corporate governance, implementation, experimental economics, mechanism design

JEL Classification: G3, C7

Suggested Citation

Gillette, Ann Brewer and Rebello, Michael J. and Noe, Thomas H., Corporate Board Composition, Protocols, and Voting Behavior: Experimental Evidence (August 2002). FRB of Atlanta Working Paper No. 2000-10, Available at SSRN: https://ssrn.com/abstract=244084 or http://dx.doi.org/10.2139/ssrn.244084

Ann Brewer Gillette (Contact Author)

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Michael J. Rebello

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Thomas H. Noe

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 3BJ
United Kingdom

University of Oxford - Balliol College ( email )

Broad St
Oxford, OX1 3BJ
United Kingdom

Bank of Finland ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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