Red flags for an investor: age alone is not a main driver of our concerns.

• Author: Anderson, Donna F.
• Position: BOARD DIVERSITY

I HAD AMPLE TIME to ponder questions of age and experience last month when seven friends and I hiked to the bottom of the Grand Canyon. On the arduous 10-mile hike back up to the South Rim, we encountered seemingly fit hikers in their 30s who struggled and complained every step of the way. We also met hardy, adventurous souls in their late 60s who left us in their dust. When it comes to climbing out of the Grand Canyon, it was clear that experience and preparedness take you farther than youthful energy alone.

This experience caused me to rethink my assumptions about age, ability, experience and fortitude. I suspect the same dynamic applies to the selection of board candidates. Based on outward appearances, it's impossible to predict who will turn out to be an especially effective director.

From the perspective of an institutional shareholder, issues of age and tenure on a board are integrally linked with other facets of board diversity. However, it's important to remember that as outside stakeholders we can only make inferences about the board's actual working dynamic based on limited information. The proxy offers only the directors' names, brief bios, and committee assignments. We recognize the limitations of this data set, and we would not set out to draw conclusions about an individual director's effectiveness based on these morsels of information. Instead, we endeavor to form an impression of the board overall and the probability that it will help us meet our objective of superior performance over a long-term investment horizon.

We derive this overall impression of the board's suitability based on a company's industry, country, competitor group, and station in its own life cycle. It is a gross generalization to say we expect to find more youthful directors on our tech and media company boards, more women on our consumer and specialty retail company boards, more engineers on our IT and software company boards, and more international executives on boards of our companies that are expanding globally ... but it is also somewhat true.

I consider it a red flag when, for example, a fast-growing technology company in one of our clients' portfolios has a board that is 100 percent "pale, male and stale," to quote the inimitable Nell Minow. Age alone is not the driver of such concern. Instead, it's our conviction that true diversity of thought, experience, and world views leads to more robust questioning about the potential directions the business...