Consensus in Diverse Corporate Boards

A spatial model of preferences over actions illuminates decision-making by boards of directors. Directors have diverse preferences characterized by circular indierence curves around their ideal actions. Board decisions are given by a new model of consensus, which is mo-tivated by the idea that the outcome must be consistent with recourse to majority voting for resolving any disagreements. We derive a num-ber of properties of this model; perhaps most notably we develop the idea that the information a new director brings to a large board is probably more important than the new directors impact on voting, especially when existing preferences on the board are not too diverse. This implies, for example, that although an executive from a supplier might have preferences far from value maximization for this rm, the executive may still be a valuable director because of the information the executive brings to the board. preliminary draft comments welcome The authors are grateful for useful discussions with Cindy Alexander, Octavian Carare,