Paper Explores Aging Trends on Corporate Boards

A group of academics released a paper which claims to be the first to examine the board aging trend and its consequences and the costs and benefits of older directors and their impact on board effectiveness and firm performance. The authors say that the evidence of their research should give pause to “companies considering lifting or waiving mandatory director retirement age requirements, so as to lower the burden of recruiting and retaining experienced independent directors.” The paper observes various data and posits that governance reforms like Sarbanes-Oxley have led public firms to rely on a shrinking pool of qualified, but older, directors. They note that during the period of 1998 to 2014, the median age of independent directors at large U.S. firms rose from 60 to 64, and the percentage of firms with a majority of independent directors age 65 or above nearly doubled from 26% to 50%. They note that while older independent directors can be valuable assets to firms because of their broad experience and availability, “there are reasons to suspect that older directors can hinder board effectiveness and firm performance.”