Horowitz argues that a board's primary function isn't just strategic advice, but to legally protect the CEO. Running material decisions like equity grants past the board shields the CEO from personal liability and lawsuits—a danger many founders underestimate.

A board's duty to maximize shareholder value is an expected value calculation. A $100B offer with a 75% chance of closing is valued at $75B, making an $80B offer with 100% certainty more attractive. Boards weigh financing and regulatory risks heavily against the headline price.

Despite Warner Bros. having a "no shop" provision with Netflix, their board has a fiduciary duty to consider a superior offer. This creates a loophole where a persistent bidder like Paramount can force the target to re-engage, keeping the auction alive even after a winner is chosen.

An acquisition target with a valuation that seems 'too good to be true' is a major red flag. The low price often conceals deep-seated issues, such as warring co-founders or founders secretly planning to compete post-acquisition. Diligence on people and their motivations is more critical than just analyzing the financials in these cases.

CEOs are often exceptional at building relationships, which can co-opt a board of directors. Directors become friends, lose objectivity, and avoid tough conversations about performance or succession, ultimately failing in their governance duties because they "just want them to win."

As part of its equity deal with Intel, the U.S. government has agreed to vote its 9.9% stake according to the board's recommendations. This arrangement effectively hands the board a powerful, stable voting bloc, insulating management from shareholder activism and reinforcing the existing power structure.

A key due diligence red flag is management's history. Several board members were involved with companies that went bankrupt, and the CEO was previously the CFO at SunEdison before its high-leverage collapse, raising governance concerns for potential investors.

The HUMM Group board delayed disclosing a superior third-party takeover bid until after an activist challenge. This strategic timing served to "cleanse" the chairman of material non-public information, legally permitting him to immediately buy more shares and entrench his position.

Investment research suggests the significant performance signal in governance isn't achieving a perfect score, but rather avoiding companies in the worst decile. The key is to steer clear of clear red flags—like misaligned boards or poor capital allocation—as this is where underperformance is most clearly correlated.