In an earlier
post we commented on the importance of improving a
company's risk profile and performance by implementing methods
and practices to ensure the success of gender diversification
policies. Citing an academic study on management diversity entitled
Women Stay Out of Trouble," we pointed out that gender
diversification has a financial benefit because, according to the
study, women in management are usually more risk-averse and law
abiding, thereby protecting firms from various types of lawsuits.
But does this mean that all women are risk-averse, or that the
presence of women ensure that boards make their decisions in a more
A recent study entitled "Female Board Representation and Corporate
Acquisition Intensity" has been publicized purely for its results, as opposed
to its analytical methods. In a nutshell, the study found that the
proportion of women on the boards of U.S. public companies was
inversely related to the number of acquisitions by the company. The
unfortunate, short-sighted take away from this is that more women
in leadership leads to lower M&A activity.
But this study revealed something much more important and
helpful to underpin the long-held goal of enhancing diversity on
corporate boards. Instead of categorizing women as risk averse, the
study uses social identity theory to convey how individuals
interact with one another based on how they categorize their
individual identity. The authors of the study contend that a board
will act differently when it is comprised of individuals who
exemplify multiple identity categories than if the board is
comprised of a singular category. When there are different types of
people making decisions there's a lower risk of groupthink and
a greater chance that decisions will be made in a more
comprehensive manner. One of the consequences of more comprehensive
decision-making processes is that there is a decrease in the number
and dollar-volume of acquisitions – a more scrupulous board
will not take up every possible acquisition target.
Hopefully this study will be followed by others that will assess
whether a decrease in acquisition activity due to a more diverse
board leads to better financial outcomes for firms. Until then,
studies such as this one should challenge companies to make their
boards more diverse to enhance their decision-making processes.
The author would like to thank William Goldbloom, articling
student, for his assistance in preparing this legal
About Norton Rose Fulbright Canada LLP
Norton Rose Fulbright is a global law firm. We provide the
world's preeminent corporations and financial institutions with
a full business law service. We have 3800 lawyers and other legal
staff based in more than 50 cities across Europe, the United
States, Canada, Latin America, Asia, Australia, Africa, the Middle
East and Central Asia.
Recognized for our industry focus, we are strong across all the
key industry sectors: financial institutions; energy;
infrastructure, mining and commodities; transport; technology and
innovation; and life sciences and healthcare.
Wherever we are, we operate in accordance with our global
business principles of quality, unity and integrity. We aim to
provide the highest possible standard of legal service in each of
our offices and to maintain that level of quality at every point of
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).