Boards are getting older.

AuthorHodgson, Paul
PositionBOARD DIVERSITY

Most board nomination committees look for a certain level of experience in at least some if not most of their directors, so the average age of most directors and boards is inevitably going to be high since you cannot gain experience without, well, experience.

So, is the tendency toward recruiting experienced directors making boards too old? That's impossible to answer without first determining that age is, of itself, a bad thing.

One thing we can say with certainty is that boards are getting older. Exhibit 1 shows that the average and median ages for directors in the Russell 3000 have increased over the last five years. Statistics for the first year are taken from Governance Practices Reports published by The Corporate Library (now a GovernanceMetrics International business). The figures for 2011 are based on data as of March 7, 2011.

EXHIBIT 1

2007 Median director age: 60 years old

Average director age: 59 years old

2011 Median director age: 62 years old

Average director age: 61 years old

Although Exhibit 1 shows that the directors on average are older, Exhibit 2 shows that not only is the number of directors under 40 increasing, it has overtaken the number of directors over 80, even though that number is increasing. This suggests that the ages of directors are getting more diverse.

EXHIBIT 2

2007 (total 21,787 directors)

436 directors under 40 years of age

218 directors over 80 years of age

2011 (total 18,116 directors)

644 directors under 40 years of age

406 directors over 80 years of age

Whether a board is good or bad, however, is not just a question of age, although it has its importance. For example, GovernanceMetrics has always tracked the age of directors and provides the ages of each director in its ratings reports. It also provides the average age of directors on the board and compares this to the industry average, local market average, and global average. In addition, GovernanceMetrics records whether a company has a policy providing for limits on the tenure of directors as well as age limits.

But our ratings do not simply red flag companies for having older directors, or for having directors above the retirement age. As with most, if not all, of the metrics that drive our ratings it is not about single metrics but about combinations of two or more metrics. We have always believed that age is problematic only in connection with tenure and independence concerns. Flags are raised when we see that an octogenarian founder and his...

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