I've been in bands at both extremes and various combinations between.
In my experience either can work; it depends much more on the character of the individuals and the degree to which expectations are shared.

My ideal model (never achieved precisely, but we came close) is a democratic one, where one person (chosen democratically) is responsible for outside business contacts, but given guidelines (set democratically) for what is an acceptable booking. Anything this "manager" thinks might be a good idea but which falls outside these boundaries needs to be approved by the group. Equipment purchases, etc. are decided democratically. This is easy to implement for the business side.

As far as the artistic side, including personnel decisions, I think it's harder because the communication is so much more complex. The more equal the talents and experiences of the members, the more democratic it can be. Problems arise when someone thinks more highly of him/herself than he/she ought... but again, character and communicated expectations make the difference.

I have had the good luck to have had positive experiences with most of the groups I've been associated with. But I've seen both democratic and monarchical groups have terrible problems, too. You've got to have the human relationships working or the artistic/professional relationships will fail.

-Glenn