Age matters when it comes to boards

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In the drive for more diverse boardrooms, one factor often gets overlooked: age.

A new report from Bernstein has revealed that just 5 per cent of directors within the S&P 500 companies are under the age of 50, with nearly 70 per cent of directors representing the baby boomer generation alone.

It is understandable that those with the time and inclination to serve on boards tend to be in the latter stages of their careers and perhaps after they have finished their time as an executive. But this overlooks a critical point: multigenerational boards make better business sense. Bringing in a wider range of ages offers fresh perspectives that drive stronger operating performance, build resilience and strengthen succession planning.

The authors of the report, Bob Herr and Luke Pryor, cite research from the University of New Hampshire that found that the presence of directors from Generation X (those born between 1965 and 1980) on boards was correlated with better financial outcomes, which they measured by return on assets and price to book. Separate research found that age diversity on boards was linked with higher-quality earnings reporting, reduced loan charge-offs and fewer non-performing loans.

Bringing more age diversity into corporate boards also helps phase in new leaders while retaining valuable experience and knowledge, ensuring any leadership changes are smoother rather than disruptive.

“Directors need the right mix of skills and experience to provide effective guidance and oversight. That often comes with time. But there’s a point at which boards may become too monolithic,” say Herr and Pryor. “We’ve yet to see any regulation or governance codes that address this issue.”

Boards have long leaned towards older generations, favouring candidates with extensive executive experience and established records. There is also often a bias towards the familiar, reinforcing closed recruitment practices and limiting boardroom opportunities for younger professionals who may be outside established networks. But a board that spans generations is also likely to be more reflective of the broader diversity of today’s workforce and consumer base, enabling companies to better navigate fast-changing markets and complex business challenges.

As cyber security and artificial intelligence dominate boardroom discussions, younger candidates are increasingly being brought into the fold, either as internal experts or external non-executive directors. “When boards think, ‘do we have the right suite of skills among us?’, it is often people of a different, younger generation that are being brought in on these topics,” says Pavita Cooper, who works with boards and executive teams on corporate culture and building inclusivity.

In the absence of younger directors, many boards are finding other ways to incorporate youthful perspectives, using shadow boards filled with younger colleagues, boardroom observers and apprenticeships. These methods allow boards to tap into fresh ideas without formally appointing younger directors, while also giving those participants exposure to board-level decision making. They can then use these skills in their executive life.

If a company wants to retain a high-performing, younger executive, one way to keep hold of them is to give them a role on an internal board or permission to sit on one externally. Non-financial rewards such as these enhance their skills and experience, and prepare them for future leadership roles.

Henry Odogwu, an executive director on the board of BlackRock’s UK life insurance company and a board member at charity Barnardo’s, tells me: “I’ve increased my ability to think more strategically and now I better understand how to influence indirectly. Initially, I was unsure about what I would bring to the table, but it’s been good for me and good for them.”

But Odogwu, who is 46, acknowledges that it is a big time commitment to sit on boards alongside his day job and parenting a toddler. Many in their forties are navigating demanding executive roles and caregiving responsibilities at the same time, making board service a lower priority.

“It’s not just four board meetings a year, it’s the committee meetings, the board packs can be intensive and the reading needs to be done in detail if you’re new. Not only do you need a company that is supportive of that time commitment — either paid or unpaid — your family has to be too.”

“It’s not for everyone.”

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