Board Structures Around the World: an Experimental Investigation

We model and experimentally examine the board structure–performancerelationship. We examine single-tiered boards, two-tiered boards,insider-controlled boards, and outsider-controlled boards. Wefind that even insider-controlled boards frequently adopt institutionallypreferred rather than self-interested policies. Two-tiered boardsadopt institutionally preferred policies more frequently buttend to destroy value by being too conservative, frequentlyrejecting good projects. Outsider-controlled single-tiered boards,both when they have multiple insiders and only a single insider,adopt institutionally preferred policies most frequently. Inthose board designs where the efficient Nash equilibrium producesstrictly higher payoffs to all agents than the coalition-proofequilibria, agents tend to select the efficient Nash equilibria.