GenXers, Millennials Seldom Seen on Nation’s Top Company Boards

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By Andrea Vittorio

Few of the nation’s top companies have a board member born after the baby boom ended, according to new research from consulting firm PricewaterhouseCoopers LLP.

GenXers, millennials, and other generations born after 1964 make up about two-thirds of the U.S. population, but directors from these generations take up only 6 percent of all seats on S&P 500 companies’ boards, the April 24 analysis showed. PwC called that finding “troubling” given technological changes companies face and demographic shifts in their workforce.

For many companies, “the users of their products are also probably younger,” Paula Loop, who leads PwC’s Governance Insights Center, told Bloomberg Law. “So is there an interest in having those voices in the boardroom to provide a different perspective?”

For 90 percent of directors that PwC surveyed in late 2017, the answer is yes. They rated age diversity as more important than any other aspect of diversity, including gender and race. But when directors were asked about their own board’s makeup, more than half said they already have age diversity and don’t need more.

“You have to question what they mean by age diversity,” Loop said, since the average independent director at companies in the S&P 500 index is 63 years old. That’s two years older than the average director a decade ago, according to a recent analysis by recruiter Spencer Stuart.

Defining Age Diversity

PwC’s study defined post-baby boom directors as those who are 50 or under. It found that less than half of S&P 500 boardrooms (43 percent) have at least one younger director.

Younger directors are much more likely to be found at companies with younger CEOs, such as Chipotle Mexican Grill Inc., Expedia Group Inc., and Facebook Inc. Sixty percent of the companies with a CEO who is 50 or younger have at least one younger independent director, compared with 42 percent for those with a CEO over age 50. In some cases, that’s because the company’s CEO is also a director.

Boards are becoming “more thoughtful” about their makeup, Loop said. Companies in the S&P 500 index added a record number of first-timers to their boards last year as they looked beyond the traditional candidate pool of current or retired CEOs, the Spencer Stuart report showed.

Incoming directors are more diverse, too, with women and minorities making up more than half of new directors for the first time.

Long Road to Retirement

Like the push for more boardroom diversity, waiting for a sitting director to retire and make room for a younger member can take time, Loop said. Most of the companies that PwC analyzed got around that issue by increasing the size of their board, rather than relying on retirements.

Younger directors bring their own retirement challenge. If they join as a 40-something and stay until the board’s retirement age, typically set at 73 or higher, that could make for a 30-year tenure or more.

Some boards are discussing tenure upfront while others are thinking more seriously about setting term limits for directors or an average term limit for their board, PwC said.

“I wonder whether younger directors will even be interested in being on one board for a long time,” Loop said. Younger generations might be more interested in switching to another company’s board after a few years, she said.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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