Are Australian boards too old? Three industry figures share their views.
Anne O’Donnell FAICD, AICD board member
Australia has an ageing workforce and a government encouraging us to consider working longer. Older workers have the ability to make a valuable contribution to the workforce and directors are no exception. The issue is not age, it is diversity. Age is one aspect of the diversity debate; the other key issues are skills and gender.
In his recent report into the attributes of good governance, Dr Robert Kay found key attributes of an effective governance team included diversity of view and experience and independence of mind. If we are serious about diversity of view and experience it follows that age must be an important consideration in succession planning and board renewal.
It is as equally hard to justify a board comprised exclusively of tech-savvy females aged 35 to 40 years old as it is to justify a board comprised solely of 65 to 70-year-old male accountants. On the face of it, neither group would appear to be able to bring a diversity of view and experience. Ideally, a board should comprise directors with a range of ages, skills and life experiences.
Australia has made some progress in acknowledging that we need to increase the diversity on boards. But we still have a long way to go. As directors, we need to implement a holistic and disciplined approach to succession planning and renewal if we are to progress diversity and move away from past poor practices. Boards that do succession planning well take a disciplined approach to developing a skills matrix that assesses the current skills of directors and considers what skills are required to take the company forward.
In a dynamic business environment, skill requirements change over time, so the matrix should be reviewed and agreed annually to ensure the skill set supports the agreed strategy. The skills matrix can also provide a snapshot of the gender, age and location of directors, a one-page summary providing the basis for easily assessing future needs and developing recruitment criteria.
The other area boards need to monitor more closely is director tenure. Fixed terms open up the opportunity to make good use of a skills matrix and ensure disciplined renewal.
Martin Lawrence, governance analyst, Ownership Matters
Being a director of an ASX-listed company has from time immemorial been the preserve of men of a “certain age”. Despite some encouraging changes in terms of gender diversity over the past few years in response to initiatives by the Australian Institute of Company Directors and the ASX, the “median” company director is male and well over 60. In fact, in recent years three-quarters of all male S&P/ASX 200 non-executive directors (who constitute more than 80 per cent of all directors) have been over 60 years old.
Directors under the age of 40 are much rarer than directors over 70 and the only longitudinal study on the average age of ASX company directors, that of the Australian Council of Superannuation Investors, has shown the average director age rising steadily over time. A major argument in favour of appointing more women to company boards is that they add not only to gender diversity but also to age diversity. On average female non-executive directors are six to seven years younger than their male counterparts.
No one questions the need for seasoned counsel and experience on a board but commercial acumen is not the sole domain of those with grey hair. At present almost the only time a person under 40 is appointed to an ASX-listed board is if they are related to the founder or are part of the founding family. A compelling commercial argument for adding women to company boards is that it adds a variety of perspectives to board deliberations; the same holds true for people born in or after the 1960s. This cohort is not only likely to have different perspectives to older directors, they are also likely to be closer in age to customers and employees.
It is unclear whether the dominance of directors aged 60 and over on company boards reflects the natural human tendency for people to seek out people like themselves, a lack of people aged under 50 willing to serve on company boards, or a market failure. A talented professional services firm partner in their late 30s or 40s, or a talented and rising executive may simply not be aware of the potential to serve as a company director simply because no one has ever thought to ask them.
Neil Waters, partner, Egon Zehnder
Age is a bias just like gender, race and religious affiliation. Perhaps a better question is how aware are we of our biases? And whether age is one of the conscious or unconscious biases we carry.
I have spoken before in this magazine about the importance of directors seeing their time on boards as a legitimate stage of their career, a stage that all too often is left unplanned and is not thoughtfully executed.
The best directors, it seems to me, see their director career in seasons. Spring as a non-executive director to learn the trade so to speak, summer and autumn leading committees or boards themselves as chair, probably narrowing their focus to a smaller number of organisations as a consequence of needing to spend more time in each. Winter to stay indoors and reflect.
That generally requires executives to consider becoming a director in their 50s, something unheard of 10 or 15 years ago.
However, the fact that more executives are doing this, by definition, makes boards younger on average. Is it too young? No. The executives we are appointing in their “youth”, in my mind, are very sound.
In fact I wonder if we have gone too far. Directors who have been on boards after their first rotation (say six years) can find it hard to transition to the second set of organisations.
Some directors in their mid-60s too often find their experience overlooked, with nomination committees preferring to go for younger executives with what boards think are sound reasons.
But are they? Those outcomes may reflect biases that relate to age. Some of those biases are quite troubling; that director experience is not valued as much as more contemporary executive experience; that being younger by definition means that you have more potential (I know many low-potential young people); that being younger by definition means that you are more in touch with important forces shaping the future of companies.
In the seasons of a director’s life autumn does come, but the last long languid days of summer offer great opportunity for boards around the country, an opportunity that should be grasped with both hands.
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