This paper explores leadership within organizations. Leadership is distinct from authority because following a leader is a voluntary, rather than coerced, activity of the followers. This paper considers how a leader induces rational agents to follow her in situations when the leader has incentives to mislead them.

How can boards be chosen through a process partially controlled by the CEO, yet, in many instances, still be effective monitors of him? We offer an answer based on a model in which board effectiveness is a function of its independence. This, in turn, is a function of negotiations (implicit or explicit) between existing directors and the CEO over who will fill vacancies on the board. The CEO's bargaining power over the board-selection process comes from his perceived ability relative to potential successors. Many empirical findings about board structure and performance arise as equilibrium phenomena of this model.