Doing Deals like a Girl (and the Rewards of Open Corporate Culture)

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The more things change, the more things stay the same. As compliance matures as an industry, we sometimes forget the foundational best-practices that our programs are built upon. This Friday, as we do every last Friday of the month, we will revisit some of our most educational posts from the past. We think you’ll find they are just as relevant today.

Originally published January 2014


It turns out girls may do deals better than boys. New research shows: the more women on corporate boards, the more successful their mergers and acquisitions. It is more nuanced than the flip title of my post suggests (yes, that was to get your attention!), but there’s a larger point to be made about the importance of a corporate culture – from the top down – that benefits from the rewards of an open and diverse workplace.

...the cost of a successful acquisition is reduced by 15.4 percent with each female director added on a board. 

The study, Director Gender and Mergers and Acquisitions, was conducted by the University of British Columbia’s Sauder School of Business. It shows the cost of a successful acquisition is reduced by 15.4 percent with each female director added on a board. In theory, the less expensive the acquisition, the greater the potential for upside. The research found companies with women directors were less likely to approve dubious acquisitions or overspend, and actually approved fewer deals in total as well, resulting in improved shareholder value.

The authors attribute this to a woman’s tendency to be less ego-driven and more risk-adverse. There are some stereotypes at work here no doubt, but the idea is women directors are less likely to take on an acquisition unless they feel very sure that it will be good for shareholders, resulting in more negotiation which may explain lower premiums.

The research coincides with California lawmakers voting overwhelmingly for legislation formally encouraging corporations to add more women to their boards. California is the first state to pass such a law, and it’s likely to pave the way for others. These sorts of requirement are already bubbling up outside the U.S.

California Senate Resolution 62  does not impose legally binding quotas, but rather urges publicly held companies with nine or more director seats to fill at least three with women over the next three years. Companies with five to eight directors should have at least two women in that timeframe, but there are no penalties or sanctions for noncompliance. 

Requirements are one thing, but diversity of talent should be an objective with or without them, and wise companies are implementing adjustments to their culture to attract top talent from diverse sources.

Part of that effort is providing ethics training and awareness to build the right culture, compliance with current laws that facilitate inclusion and a discrimination-free environment and providing channels like internal whistleblowing hotlines as a check against slips. 

This undeniable trend toward more scrutiny and expectations around board diversity is here stay, and appears to be gaining momentum. USA Today guest columnist Mark Rogers urged shareholders of public companies to "spearhead the boardroom diversity battle." Rogers, the founder and CEO of BoardProspects.com, also pointed to mounting evidence supporting the theory that companies with gender-diverse boards record better financial results, on average, than other organizations. Rogers cites a recent Catalyst study in reporting that, in terms of return on sales, "companies with the most women board directors outperform those with the least by 16 percent and companies with the greater number of female directors outperform on return on capital investment by 26 percent." In his piece, Rogers concludes that the battle to achieve boardroom diversity will be won only after high-profile public companies are no longer making “token gestures” of female and minority board appointments when under shareholder scrutiny.

"Companies with the most women board directors outperform those with the least by 16 percent and companies with the greater number of female directors outperform on return on capital investment by 26 percent."

The bottom-line is that tapping diversity of strength from top to bottom makes companies better. Diversity goals and ethics and compliance programs should not be about eliminating risk, but enabling success and creating measurable value.

The end goal should be to have a company that is a draw for the best – and most diverse – talent. Not one that simply stays ahead of the regulations. It’s an incredible opportunity to not only advance female leadership, but to also drive bottom-line economic achievement.


What do you have to say? Share your thoughts in the comments below or join a discussion group on Compliance Next.

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