Maybe it’s not that surprising that corporate boards are a sea of grey, dominated by directors who measure their experience and time of service in decades.
After all, it takes more than a few years to rise to a position of such high esteem and responsibility.
But when most of the experience in those boardrooms lies in the distant past, the business risks losing touch with how consumers and the world work today, says Patricia Lenkov (www.agilityexecutivesearch.com), author of Time’s Up: Why Boards Need to Get Diverse Now.
That doesn’t always bode well for the bottom line.
“The 70 and 80-year-olds sitting on boards today grew up well before the social-media age and even before the advent of the internet in some cases,” says Lenkov, a thought leader on board recruiting and founder of Agility Executive Search.
“These technologies are integral to the way millennials and Gen Z communicate and experience the world. Anyone who wants their business to connect with a younger demographic needs to disengage from established assumptions and practices.”
A good way to accomplish that, she says, is to recruit some younger executives into the boardroom, balancing wisdom and institutional knowledge on one side with those from a younger generation on the other.
More Directors Are Over 75 Than Under 50
Aging boards are the norm in some corporations.
A study by the Investor Responsibility Research Center Institute found that 80 percent of S&P 500 boards in every industrial sector have an average age in the 60s. That study was published in 2017, but Lenkov hasn’t seen evidence of significant change since.
“What’s problematic is that there are more board members who are older than 75 than younger than 50,” Lenkov says. “We cannot talk about older board members without considering the culture that shaped them.
“I remember some directors early in the internet era who did not know how to use the online portal that contained background materials for upcoming board meetings. Again and again, I would hear, ‘John doesn’t know how to use the portal.’ I would have to get these materials printed out and shipped overnight to that board member. I hear this sort of thing still goes on today.”
Businesses that fail to keep up with technology’s impact on consumer habits and preferences – especially among young consumers – will become obsolete, Lenkov says.
Concerns About Entrenched Ideas
Another potential issue with older directors is they can become financially dependent on their director compensation if that’s their only source of income, she says. In some cases, self-preservation may kick in, leading them to rubber stamp whatever a CEO proposes to stay in good graces.
Similarly, over time, long-serving directors (of any age actually) can become less engaged with strategic thinking and more committed to simply preserving the organization’s stability.
“They naturally develop bonds and relationships not only with other board members but with executives employed by the company,” Lenkov says. “This will make independence and objectivity increasingly questionable.”
That doesn’t mean companies should purge their boards of older directors in favor of a complete youthful overhaul, Lenkov says.
“In fact, certain businesses and industries lend themselves to a majority of older directors,” she says. “For example, an assisted-living business can benefit enormously from having an older director – or several. Many other industries may benefit from having some older directors. However, all boards should be composed of directors of different generations.”
Lenkov says that asking boards to reserve seats for younger directors has nothing to do with ageism.
“It has to do with keeping boards relevant, current, and ever evolving,” she says. “It has to do with a board’s ability to understand a business environment that changes by the nanosecond. The best boards will be diverse in terms of age composition. Different generations, each providing value and unique insights.”
About Patricia Lenkov
Patricia Lenkov (www.agilityexecutivesearch.com), author of Time’s Up: Why Boards Need to Get Diverse Now, is widely regarded as a thought leader on board recruiting, corporate governance, composition, and succession.