But most scholars have examined acquisitions from the buyer’s point of view, says Jerayr “John” Haleblian, a University of California at Riverside business professor. Few have investigated board behavior on the other side of the bargaining table: the targeted company. How do those directors secure the best possible sale price for shareholders?

Haleblian and two professors from business schools in Zurich and Frankfurt gathered data from more than 400 public company acquisitions between 2002 and 2014. They hypothesized that boards that met more often would extract higher sale prices. They also predicted that board composition mattered, so they analyzed the effects of having board members with M&A experience and gender diversity.

Many of their assumptions were accurate. Boards that convened more frequently landed better deals, and that effect was enhanced when a company had at least one female director—even more so with two. Having two directors with experience navigating a takeover was also linked to higher sale prices. And a board’s ability to negotiate higher premiums suffered when even one director at a target company was “overboarded,” meaning they had three or more board seats.

The financial impact of these variables was not paltry. The study found that the target company’s sales price was about 5% higher when a woman sat on the board. “If the difference had come out to $100,000 or something, who cares?” says Haleblian. But each of these drivers changed the company’s value by multiple millions of dollars.

There were, however, some limitations to the study. The researchers didn’t interview directors about how gender diversity or meeting frequency influenced their negotiating tactics, so they had to make inferences to explain their results. They also couldn’t measure the benefits of having multiple female board members because none of the firms in their dataset had more than two. (Only one-third of the boards studied had any women among their ranks.)  

Still, the study confirmed current views about board composition and engagement. “You want board members who are attentive, have their mind in the game, have relevant experience, and have a diversity of views,” says Haleblian. When companies are up for sale, he adds, boards should meet at least monthly and adjust their schedules accordingly as the transaction gets more complex. 

Boards that follow this recipe will see a richer assessment of a deal’s terms, and will require more time, which is a good thing, says the professor. Boards that rush into an agreement often earn less than they could have if they had spent more time exploring all angles.

Lila MacLellan
lila.maclellan@fortune.com
@lilamaclellan

Noted

“The average compensation for a public company board director ranges from about $100,000 to $300,000 a year, so maybe that’s an incentive to help you combat your imposter syndrome.”

—Olivia Morgan, cofounder and board chair for the California Partners Project, on why women should find the courage to seek out board seats at Fortune’s MPW Next Gen 2023 conference 

On the Agenda

👓  Harvard economist Larry Summers called the U.S. debt ceiling standoff a “foolish exercise” that could damage the economy even if a default is averted. (Remember 2011?)

📹 Who is Linda Yaccarino, the advertising executive who agreed to be Twitter’s new CEO? Reporters for the Wall Street Journal introduced listeners of The Journal podcast to the woman who will, they note, become Elon Musk’s boss and employee.

📖  Board-level topics are the meat of this sprawling Ask Me Anything feature published in Wharton Magazine. The school’s experts opine on the future of A.I., hybrid work, share buybacks, ESG backlash, and more.  

In Brief

- In 2022, 46 S&P 500 CEOS received twice the pay their boards expected them to take home. But salary increases for the majority of chief executives were rare, according to the Wall Street Journal. Most CEOs saw their compensation shrink. 

- Thousands of Japanese companies are struggling to find successors for aging leaders. Now, a 32-year-old has created software that uses A.I. to play matchmaker to companies that ought to consider merging, with humans stepping in to broker the deals. The company is so successful that its young founder is almost a billionaire.    

- Expect displacement and economic disruption from droughts and wildfires over the next five years, say forecasters at the World Meteorological Society. Both human-made climate change and the arrival of an El Niño are projected to cause record-high temperatures.

- For male business leaders, neurodivergence—autism, ADHD, or dyslexia, for example—can add a certain mystique. But living and working with an atypical brain can be complicated for women, and that needs to change, Fortune’s Paige McGlauflin writes. 

Editor’s Pick 

Tim Ryan, the U.S. chair of PwC, made “leading with love” his theme in his recent commencement speech at Babson College, his alma mater. It was risky; few CEOs can pull off an earnest discussion of warm emotions without eliciting cynicism and eye rolls. Yet Ryan drove the point home with an air of authenticity by sharing select stories from his career.  

He recounts his bumpy start in the white-collar world after growing up in a blue-collar home. He also describes an email he wrote to his entire staff in 2016, just a week into his job as CEO, when the U.S. was reeling from the killing of two Black men—Philando Castile, in Minneapolis/Saint Paul, and Alton Sterling, in Baton Rouge—at the hands of police. “My team and I got around the table, and we talked about the fact that these things were on our people’s minds,” Ryan says. “Then I did something that was not terribly remarkable. I sent an email, and it just said, ‘I know you are hurting. We are here, and we care about you.’” 

The speech continues:

“What happened afterward was completely remarkable. Almost 1,000 people wrote back in the first 12 hours, and while the replies were all different, there was a theme, and it was summed up by one from one young woman. She said, ‘Tim, PwC has made incredible progress over the last couple of decades around inclusion and making people feel comfortable in the workplace. But when I came to work Friday morning, the silence was deafening.’ And folks, I knew I needed to take that great plan I had and chuck it out the window. Because what became clear to me, as a young, ambitious CEO who had a plan, was that the people I was counting on to help achieve that plan were coming to work, and they had other things on their minds, and their hearts were broken. So, we decided to tackle the problem head-on.” 

Watch the full talk (or read it) here, and have a nice weekend.