Have boardrooms become predictable? Kath Walters asks whether organisations should be actively looking to recruit younger directors.
People are living longer than ever before in this amazing age of technology and change, but companies are dying in their teens. Admittedly the global financial crisis took a high toll, but the 100-year trend is consistent.
The average lifespan of an American company listed in the S&P 500 index decreased by more than 50 years in the past century, from 67 years in the 1920s to just 15 years today, according to data from Yale University.
Meanwhile, 57 per cent of the directors of S&P/ASX 200 companies are aged 60 years or over, new data from law firm, Corrs Chambers Westgarth, tells us. As high as that percentage sounds, it actually represents a trend towards younger boards. Five years ago, 75 per cent of company directors were aged 60 years or over. That means our current rate of 57 per cent is an improvement. Interestingly, the proportion of directors under 50 years (11 per cent) has doubled since 2009. But are these numbers good enough?
The word diversity has come to stand for gender diversity – an excellent goal – but there are at least two more elements to true diversity: age and cultural background. The good news is that gender diversity research suggests it is worth experimenting with age diversity too.
Top companies with at least 25 per cent women on their boards perform 7 per cent better than those with all-male boards, new Australian research by the Centre for Gender Economics and Innovation, and Infinitas Asset Management has found. It is a really extraordinary result, but one that is consistent with other data published over the past 15 years.
Commenting on the result, the chair for the Centre for Gender Economics and Innovation, Susanne Moore, told the Sydney Morning Herald: “Common sense would tell you that if you have a more diverse group sitting at the decision-making table, then you’re going to get more diverse ideas.”
But will age diversity deliver results too? By that logic, can we expect the same lift in performance if companies begin to attract younger board members? Renee Carr, chair of the Australia Youth Climate Coalition, a youth movement working to solve the climate crisis, says the benefits that young directors bring to board decisions and corporate governance are very tangible. She was 26 when recruited for her role as chair two years ago.
As digital natives, with a big stake in the future, young directors bring fresh perspectives and new ideas, Carr says. “Young people bring an important perspective on disruption; when it comes to strategy and innovation, discerning the possibilities of what the world can be and where business can be. This is an area where a young person with a different experience can bring a lot.”
Carr’s board has nine members and is required to have at least 50 per cent of directors under 30. But it includes several older directors. “We recruit against a skills matrix and try to get a board that is diverse in age and experience. So it happens that when we go through that process, we also recruit people who are not young.”
More progressive and strategic recruiters will raise the diversity issue if boards themselves forget. Carr advises boards to start thinking about any barriers, such as unconscious bias or cultural issues, that might reduce the willingness and interest of young directors to become involved. “Draw lessons from other diversity challenges,” she says. “Focus on how to phrase position descriptions and criteria so that it values approach or knowledge rather than experience.”
The idea of the corporate board as the domain of the gracefully retiring professional accountant, lawyer or executive is long gone, of course. There’s nothing leisurely about the modern board. It hardly needs to be said that technology is disrupting business models in every imaginable industry. If it hasn’t happened yet, it soon will. Just ask the taxi drivers struggling to manage the upset from the car-sharing company Uber, or ask hotel owners or doctors.
The modern boardrooms need wisdom, sure, but from many sources. And it needs energy, courage and a sense of urgency. Right now, there is not enough research for boards to know for sure whether recruiting younger directors will deliver a lift in performance. But faced with the ever-shortening corporate life span, the pace of disruption and change, and the research from gender diversity, my bet is on those who embrace age diversity, rather than those who don’t.
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