Matters of age, among other components of director diversity, are increasingly becoming an important board composition issue for the board’s nominating and governance committee.
The leading governance principles recommend that director candidates “be drawn from a rigorously diverse pool” that accommodates a broad spectrum of skills, backgrounds and experiences. This reflects an expectation that the value provided by those with experience with the company’s business should be balanced by the ideas, insights and contributions provided by those who offer other experiences. Often times, those different experiences reflect matters of gender, race and other elements of ethnicity.
However, there are multiple indications that age—and especially, relative youth—is playing a more important role in the composition of governing boards. As a recent survey notes, many boards are concerned that the absence of board refreshment and age diversity can negatively impact board effectiveness and, ultimately, corporate performance. At the same time, boards are coming to recognize that younger directors provide different perspectives and often can share different experiences than those offered by older and longer tenured directors. In some cases, their level of engagement with the company’s business model (e.g, inpatient and outpatient health) provides unique insight.
As a leading survey notes, however, that heavy emphasis on matters of age can be misleading, as it is a composition factor that is particularly dependent on the circumstances of a particular corporation on its board.