This paper studies how directors' reputational concerns affect board structure, corporate governance, and firm value. In our setting, directors affect their firms' governance, and governance in turn affects firms' demand for new directors. Whether the labor market rewards a shareholder‐friendly or management‐friendly reputation is determined in equilibrium and depends on aggregate governance. We show that directors' desire to be invited to other boards creates strategic complementarity of corporate governance across firms. Directors' reputational concerns amplify the governance system: strong systems become stronger and weak systems become weaker. We derive implications for multiple directorships, board size, transparency, and board independence.

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This paper develops a model of communication and decision-making in corporate boards. The key element of the paper is that the quality of board communication is endogenous, because it depends on the e¤ort directors put into trying to communicate their information to others. In the model, directors may have biases regarding board decisions and may also be reluctant to disagree with other directors. If the only interaction between directors is at the decision-making stage, when decisions are made but discussion is limited, these frictions impede e¤ective decision-making because directors' decisions are not fully based on their information. However, if in addition directors can communicate their information more e¤ectively at a cost, then both stronger biases and stronger concerns for conformity at the decision-making stage might improve the board's decisions, because directors have a stronger motivation to convince others of their position. The paper provides implications for the design of board policies, including the use of open vs. secret ballot voting, the frequency of executive sessions of directors, board structure, and the role of committees.

Shareholder proposals are a common form of shareholder activism. Voting for shareholder proposals, however, is nonbinding since management has the authority to reject the proposal even if it received majority support from shareholders. We analyze whether nonbinding voting is an effective mechanism for conveying shareholder expectations. We show that, unlike binding voting, nonbinding voting generally fails to convey shareholder views when manager and shareholder interests are not aligned. Surprisingly, the presence of an activist investor who can discipline the manager may enhance the advisory role of nonbinding voting only if conflicts of interest between shareholders and the activist are substantial.

We consider a problem where an uninformed principal makes a timing decision interacting with an informed but biased agent. Because time is irreversible, the direction of the bias crucially affectsMany decisions in organizations deal with the optimal timing of taking a certain action. Because information in organizations is dispersed, the decision maker needs to rely on the information of her better-informed subordinates who, however, may have conflicting preferences. Consider the following two examples of such settings: (i) in a typical hierarchical firm, top executives may be less informed than the product manager about the optimal timing of the launch of a new product. It would not be surprising for an empire-building product manager to be biased in favor of an earlier launch; (ii) the CEO of a multinational corporation is contemplating when to shut down a plant in a struggling economic region. While the local plant manager is better informed about the prospects of the plant, he may be biased toward a later shutdown due to personal costs of relocation.These examples share a common theme. An uninformed principal faces an optimal stopping-time problem-when to exercise a real option. An agent is better informed than the principal but is biased toward earlier or later exercise. In this paper, we study how organizations make timing decisions in such a setting. We examine the * Grenadier: Graduate School of Business, Stanford University, 655 Knight Way, Stanford, CA 94305 (e-mail: sgren@stanford.edu); Malenko: MIT Sloan School of Management, 100 Main Street, E62-619, Cambridge, MA 02142 (e-mail: amalenko@mit.edu); Malenko: Carroll School of Management, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467 (e-mail: nadya.malenko@bc.edu). We are grateful to three anonymous referees,

a b s t r a c tWe develop a theory of leveraged buyout (LBO) activity based on two elements: the ability of private equity-owned firms to borrow against their sponsors' reputation with creditors and externalities in sponsors' reputations due to competition and club formation. In equilibrium, the two sources of value creation in LBOs, operational improvements and financing, are complements. Moreover, sponsors that never add operational value cannot add value through financing either. Club deals are beneficial ex post by allowing lowreputation bidders with high valuations to borrow reputation from high-reputation bidders with low valuations, but they can destroy value by reducing bidders' investment in reputation. Unlike leverage of independent firms, driven only by firm-specific factors, buyout leverage is driven by economy-wide and sponsor-specific factors.

Venture capital (VC) backed firms face neither the governance requirements nor a major separation of ownership and control of their public peers. These differences suggest that independent directors could play a unique role on private firm boards. This paper explores the dynamics of VC-backed startup boards using new data on board member entry, exit, and individual director characteristics. We document several new facts about board size, the allocation of control, and composition dynamics. At formation, a typical board has four members and is entrepreneur-controlled. Independent directors are found on the median board after the second financing event, when control over the board becomes shared, with independent directors holding the tie-breaking vote. These patterns are consistent with independent directors playing both a mediating and advising role over the startup life cycle, and thus representing another potential source of value-add to entrepreneurial firm performance.

We analyze how proxy advisors, which sell voting recommendations to shareholders, affect corporate decision-making. If the quality of the advisor's information is low, there is overreliance on its recommendations and insufficient private information production. In contrast, if the advisor's information is precise, it may be underused because the advisor rations its recommendations to maximize profits. Overall, the advisor's presence leads to more informative voting only if its information is sufficiently precise. We evaluate several proposals on regulating proxy advisors and show that some suggested policies, such as reducing proxy advisors' market power or decreasing litigation pressure, can have negative effects. , and participants at multiple seminars and conferences for helpful comments. The authors do not have any conflicts of interest as identified in the Journal of Finance's disclosure policy.