This surprising thing happens when you put more women in the boardroom

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.

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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.”

The decision to merge with or acquire another business is a lot like getting married: It could be wonderfully beneficial or go wildly wrong. Consider Google, which bought YouTube at what analysts now consider a steal. Or the AOL-Time Warner merger, which led to the total value of AOL stock plummeting from $226 billion to about $20 billion.

Gender, of course, doesn't protect firms from substantial loss. But previous studies have found that diversifying the boardroom promotes smarter conversations.

For a 2015 book, Aaron Dhir, an associate professor at Osgoode Hall Law School of York University and a visiting professor of law at Yale University, interviewed directors in Norway. Board quotas have been in place there since 2003, requiring every public boardroom to be at least 40 percent female.

“The heterogeneity brought about by quotas has enhanced the quality of boardroom deliberations and overall corporate governance,” he wrote. “The directors I interviewed believed that women were more likely than men to thoroughly deliberate and evaluate risks.”

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Not that everyone views quotas as a magic bullet. Plenty of U.S. businesswomen are against them, resisting a move they fear could frame qualified candidates as token hires.

Women held 19.2 percent of the board seats of S&P 500 companies in 2014, a share that didn’t budge much from the previous year, according to the most recent analysis available from Catalyst, which tracks women in boardrooms worldwide. Previous research shows that having female directors on a corporate board is associated with better stock performance in tough markets, higher return on equity, fewer leadership-related scandals and less costly mergers.

Brande Stellings, vice president of corporate board services at Catalyst and former vice president of litigation at NBC Universal, said the business case to recruit top female talent is obvious.

“More diversity,” she said, “leads to better decision-making.”