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Deadlock on the Board

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  • Jason Roderick Donaldson
  • Nadya Malenko
  • Giorgia Piacentino

Abstract

We develop a dynamic model of board decision-making. We show that a board could retain a policy all directors agree is worse than an available alternative. Thus, directors may retain a CEO they agree is bad—a deadlocked board leads to an entrenched CEO. We explore how to compose boards and appoint directors to mitigate deadlock. We find that board diversity and long director tenure can exacerbate deadlock. Moreover, we rationalize why CEOs and incumbent directors have power to appoint new directors: to avoid deadlock. Our model speaks to short-termism, staggered boards, and proxy access.

Suggested Citation

  • Jason Roderick Donaldson & Nadya Malenko & Giorgia Piacentino, 2019. "Deadlock on the Board," NBER Working Papers 26155, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26155
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    Cited by:

    1. Michael Ewens & Nadya Malenko, 2020. "Board Dynamics over the Startup Life Cycle," NBER Working Papers 27769, National Bureau of Economic Research, Inc.
    2. Marius Guenzel & Ulrike Malmendier, 2020. "Behavioral Corporate Finance: The Life Cycle of a CEO Career," NBER Working Papers 27635, National Bureau of Economic Research, Inc.

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    • G3 - Financial Economics - - Corporate Finance and Governance

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