Topics:   Board Composition

Topics:   Board Composition

May 17, 2018

How Does Your Board Define Age Diversity?

May 17, 2018

Age diversity is an important factor to achieving diversity of thought. That’s how 91 percent of directors responded in our 2017 Annual Corporate Directors Survey. They even rated age diversity higher than any other element of diversity, including gender and race. However, we noticed that more than half (52%) of directors said they have age diversity on their board and don’t need any more of it. Herein lies the disconnect: Our definition of age diversity differs from that of most directors.

So what does age diversity mean to corporate directors? Maybe it means their board has directors who are in their 50s, 60s and 70s. Or perhaps they have one director who is 55 and one who is 80. With an average age of 63 for independent directors on S&P 500 boards (and going up), what it likely means is that they don’t have many directors who are 50 or younger. In fact, there are more directors aged 75 or older in S&P 500 boardrooms than there are 50 or under, according to our new research paper, Board composition: Consider the value of younger directors on your board. That figure demonstrates that there really isn’t a broad definition of age diversity.

To find out more about age diversity on US public company boards, we analyzed the population of directors aged 50 or under serving on boards of S&P 500 companies as of the end of 2017. We wanted to see who these directors are and what their board service looks like. What we found out is that there really aren’t many of them at all: According to our analysis of BoardEx data, directors aged 50 or under make up only 6 percent of the seats on S&P 500 company boards.

What does this mean for your board? First, if it hasn’t already, your board should consider age diversity and determine what it means for your company. Second, you might consider adding a younger director or two to the board. Most younger directors (96%) have active jobs or roles, so they can bring critical workforce skills and know-how back to the boardroom. They are more likely to have hands-on experience with newer technologies like artificial intelligence or the internet of things, technologies that companies are investing in and adopting to get ahead and stay competitive. And, in many cases, younger directors are closer to the consumers that their companies are targeting. They’re also closer to millennials, whose spending habits and workplace expectations are turning traditional marketing and human resources processes and plans on their heads.

We know that board composition and refreshment is a hot topic today, and the topic of age diversity is a good conversation for boards to have. Though there’s not one accepted dictionary definition of what age diversity is, boards may also want to develop an agreed-upon understanding about what it means to their board—and why all aspects of diversity make for healthy board discussions and better board performance.

One of the most interesting data points that came out of our new report details how companies made room for younger directors. For 62 percent of the S&P 500 board seats held by independent directors 50 and under, companies increased their board size to accommodate them. The board did not wait for traditional succession planning tools to play out, such as a director leaving the board due to retirement or term limits. Increasing board size to bring younger directors on as soon as possible indicates a real desire for and appreciation of the value those individuals would bring to the boardroom. That alone should tell you that age diversity is something to consider for your board.

Comments

Dr. Anastassia LauterbachMay 22, 2018

Nasdaq, Board Room Resources and Spencer Stuart created a unique network of corporate directors under 50. This network has an Advisory Council Next Generation Boards with nine members. Most of them have solid technology expertise and understand risk management well. Traditional compliance specialists try to drag new risks (e.g., from the emerging Machine learning systems) into their established frameworks without any understanding on how these systems truly work, and what the term design’ implies. Besides, our network would like to get more international board members to better understand governance evolution around the globe.