The weird thing that happens when you put more women in the boardroom
Published: May 24, 2016 / Author: Danielle Paquette, Washington Post Wonkblog
A new study from the University of Notre Dame examines the effect that women have on corporate boards, where they are a historically rare presence, and shows us something … confusing. Turns out that a large share of female directors at public companies is linked to significantly fewer mergers and acquisitions.
Is that a bad thing?
Researchers looked at nearly 3,000 acquisitions at public companies in the United States between 1998 and 2010, comparing how many occurred before and after the boards added one or more women.
Firms that increased the number of female directors from zero to two gobbled up fewer companies. After a year, their acquisition rate dipped by an average of 18 percent, according to the study. Spending on mergers and acquisitions also fell by an average of $97.2 million. Typical acquisition size dropped 12 percent.
On the surface, these findings could be interpreted in at least two ways: Perhaps women, often stereotyped as the gentler, more risk-averse gender, dampened company productivity with their trigger shyness. Or, because roughly half of mergers and acquisitions end poorly, they knocked some business sense into male colleagues.
Craig Crossland, a business professor at the University of Notre Dame who led the study, said the reality is more nuanced.
He wonders whether his team would have discovered similar results if they substituted “black directors” or “Hispanic directors” for women. That’s because white men fill the majority of board seats in the United States, and introducing directors with different backgrounds into a boardroom can help break up potentially disastrous groupthink and cover blind spots.
“Having more women on the board changes the dynamic of the board’s interactions,” Crossland said. “You probably have more comprehensive, thorough and probably contentious discussions. You’re more likely to have a discussion about the challenges, the things that could go wrong.”
Read the entire story on the Washington Post website.