PJ Neal

Thoughts from a more-than-occasional writer

Why the Best Boards Focus on M&A [Russell Reynolds Associates]

The average director spends 200 hours a year on board activities per company (excluding travel), but not all directors spend those hours the same way. There are a set of directors who serve on the boards of high-performing companies (exceeding total shareholder return compared to relevant benchmarks for two or more years in a row) and also identify their board as operating in a highly effective manner. We call these “Gold Medal Boards,” and they operate quite differently than other boards while focusing on very different topics.

When asked to identify the areas where they spend the most time, these high performing boards overwhelmingly focus on topics that create value: strategic planning or review (69 percent versus just 59 percent of typical boards), oversight on major transactions (M&A) (36 percent versus 29 percent), and CEO and management succession planning (29 percent versus 23 percent).

In parallel to that, they also spend less time and energy on financial statement review (11 percent versus 28 percent), compliance related activities (6 percent vs 13 percent), and audit related activities (3 percent vs 11 percent). These are all backwards-looking activities, which, while important to do, do not in and of themselves create value for the business or for shareholders.

It is no surprise that mergers and acquisition are a top focus area for high performing boards, as M&A is inherently about creating value. From start to finish, boards will have a seemingly endless number of issues to address during M&A activities, but talent should always remain top of mind. Here are six specific areas where boards should focus:

Read the full paper here.