Deadlock on the Board

55 Pages Posted: 19 Dec 2017

See all articles by Jason Roderick Donaldson

Jason Roderick Donaldson

Washington University in St. Louis

Nadya Malenko

Boston College, Carroll School of Management; National Bureau of Economic Research (NBER); Finance Theory Group (FTG); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Giorgia Piacentino

Columbia University

Multiple version iconThere are 3 versions of this paper

Date Written: December 2017


We develop a dynamic model of board decision making. We show that directors may knowingly retain the policy they all think is the worst just because they fear they may disagree about what policy is best in the future-the fear of deadlock begets deadlock. Board diversity can exacerbate deadlock. Hence, shareholders may optimally appoint a biased director to avoid deadlock. On the other hand, the CEO may appoint unbiased directors, or even directors biased against him, to create deadlock and thereby entrench himself. Still, shareholders may optimally give the CEO some power to appoint directors. Our theory thus gives a new explanation for CEO entrenchment. It also gives a new perspective on director tenure, staggered boards, and short-termism.

Keywords: CEO turnover, Corporate Boards, deadlock, director elections, entrenchment

JEL Classification: G34, M12, M14

Suggested Citation

Donaldson, Jason Roderick and Malenko, Nadya and Piacentino, Giorgia, Deadlock on the Board (December 2017). CEPR Discussion Paper No. DP12503, Available at SSRN:

Jason Roderick Donaldson (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Nadya Malenko

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Finance Theory Group (FTG) ( email )

United States

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

European Corporate Governance Institute (ECGI) ( email )

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

Giorgia Piacentino

Columbia University ( email )

New York

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