Board Directors Skew Older as Companies Loosen Age Constraints

Jim Nevels, a 71-year-old former board chairman of Hershey Co., figures his experience sitting on the boards of eight companies gives him an edge.

“Quite frankly, there isn’t too much that I haven’t seen in a corporate boardroom over a 30-year period,” Nevels, who currently sits on the board of WestRock, a corrugated packaging company, said in an interview with Bloomberg Law.

He’s got plenty of company. Despite younger mandatory retirement ages for many rank-and-file workers, board directors for S&P 500 companies are increasingly skewing older. The percentage of directors in their late sixties has risen the largest, while younger directors in their forties and below have decreased in recent years.

Some of the country’s best-known boards are populated with members in their 90s. Charles Munger, vice chairman of Berkshire Hathaway, turns 100 in January, an elder statesman to his board chairman Warren Buffett, who turns 93 next month. Also in their ranks are Fox Corp. chairman Keith Rupert Murdoch (92); Hearst vice chairman Frank A. Bennack Jr. (90); and Estée Lauder Cos. chairman emeritus Leonard Alan Lauder (90).

As Nevels notes, older directors bring a wealth of accumulated experience. But detractors say it restricts bringing in diverse candidates with fresh ideas and could be detrimental if the current directors have been removed from the company’s day-to-day operations for a lengthy time. Regardless, demographic statistics show that the trend of older board directors will likely continue.

“People are living longer and are healthier longer,” Anthony Goodman from management consulting firm Korn Ferry said. “There’s generally an acceptance that people can stay longer because they are going to be contributing for longer.” Goodman is a senior client partner and head of board effectiveness practice.

Breaking Down the Numbers

The cluster of directors aged 66-70 has increased the largest for the past four years, accounting for approximately 24.1% of S&P 500 directors in 2023, up from 20.8% in 2019. In contrast, directors in their forties and late fifties have declined during the same period, according to data from The Conference Board and data mining and analytics firm ESGUAGE.

Millennial directors below the age of 40 represent the smallest percentage at 0.3% in 2023, the data shows. Nearly half of the directors are in their sixties, and about one-fifth are in their seventies and older.

More companies recently have chosen to raise or eliminate the mandatory retirement age for board members. Among the two-thirds of the S&P 500 companies with a retirement policy, a larger proportion now prefers a mandatory retirement age of 75, whereas five years ago, the trend was leaning towards 72, according to the data.

Meanwhile, the average retirement age for rank-and-file workers is 61, according to a 2022 Gallup survey.

Companies also have moved away from regulating board qualifications based on age. The percentage of S&P 500 companies without a retirement policy has increased from 30% in 2018 to 33% in 2023.

The Experience Factor

Older boards with substantial experience are better equipped to provide valuable advice, according to Rachel Goldman, partner at Bracewell LLP. Their perspective and understanding of various possibilities, solutions, and ramifications allow them to effectively advise the organization they oversee—and make better decisions, she said.

It takes several years of experience in the workforce or corporate ranks to acquire the expertise to “ask appropriate questions” in the boardroom, said Charles Elson, retired business professor and founder of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “Wisdom is acquired through experience. And at a younger age, you might not have it.”

There might be some exceptions for young directors who possess a strong technological sense that older boards don’t have, but “balance between wisdom and knowledge for right judgment should come together,” he added.

While age may confer wisdom and experience, the real challenge for directors lies in the length of time they have spent away from executive roles. The longer a director has been removed from an executive position, the more challenging it becomes for them to actively contribute and stay current in the boardroom, said Goodman. “Let’s say a CEO retired at 62 and went on board, now that 62-year-old might still be on your board at the age of 75. But it will have been 13 years since held an executive role.”

‘Renting’ a Board Seat

Some corporate governance experts say age limits are required to ensure boards are refreshed. Nevels described the board position as “renting” an apartment. “You rent it, you don’t own it. When you leave it, you want to leave it better for the next tenant.” The tendency to extend board director terms is not acceptable unless the company is going through special circumstances such as merger and acquisition that requires the members to stay.

“A finite period of the board service will allow new blood to come in. It brings new effort, new people with new information and different points of view,” Nevels, who was also a chairman at investment advisory firm The Swarthmore Group, said. “Quite frankly, as an African-American board member, it affords opportunity to refresh the board to add additional diversity of thought and background,” he said.

Age plays an important role in making great decisions, but board refreshment is critical for companies to stay flexible in a changing world, Elson said. “Age limits are important because it’s a way to move people from the board who’re probably not as effective as they were. We’re all human and we all get older,” he said.

While companies consider “age diversity” as an important factor to increase board diversity, other qualities such as gender, race and professional expertise—such as financial, operational, risk management, industry, and IT—are more highly valued, according to a survey conducted by PwC.

Age is not a sole determinant valued in corporate boardrooms; instead, the focus has shifted towards a more comprehensive evaluation that encompasses both personal attributes and business-related factors.

“I don’t see as much in regard to age anymore,” Rhonda Taylor, an executive director who leads business development at Impactful Search said.

Companies differ in size, type, and industry and each board committee seeks directors with specific skill sets that align with their company’s needs, she added.

“There isn’t a blueprint for what a board should be.”