The struggle of finding a perfectly diverse board composition is real. Gender, ethnic or tenure; where do boards find their diversity balance? Lately, the answer seems to include concentrating on age.
D.I.V.E.R.S.I.T.Y – Diversity: A commonly used word in the last few years, though a term ever so hard to pinpoint to what it should mean in a concrete way. When it comes to diversifying a board, most of us would probably think about adding a woman or a person of international background to the group. Though until recently not many people thought about what age diversity could bring.
All talk, but no action
In 2017 PwC added a question about age diversity to their Annual Corporate Directors Survey. And, surprisingly or not, a full 90% answered that diversity of age would bring diversity of thought into the boardroom. But even so, the average board member is still 63.1 years old (Source: Spencer Stuart Board Index, U.S. boards). In conclusion, boards need to better themselves! So what are the motives for breathing new life into the boards of today?
There are two main reasons for adopting younger directors:
- Reflection of company employees
In the coming years corporations will have to face working with five different generations of employees. What that entails are groups from the Silent Generation, born before 1945, trough Generation Z, born after 2000. Without going into further detail, that age difference alone will be cause for some struggles and difficulties. Each generation have different priorities and expectations. The board members (and of course also management) will have to understand and address everyone’s needs. What better way is there to set an example than having a generational diversity within the board?
- Digital transformation and cyber security
Due to the ever-changing digital landscape, age diversity is extremely relevant. With the digital transformation that companies are now undergoing, directors have a lot to oversee when it comes to technology. Not only should boards be concerned about new tech, but there is also the omnipresent alarm of cyber security.
In an article published by the Chicago Tribune last year it was stated that many board members have not, in all their business experience, had to deal with digital or cyber issues. They do not have the hands on expertise that younger members could contribute. On top of that, in the recently published PwC Annual Corporate Directors Survey, it shows that the increase of digital use sets new demands for board members. In said survey, 86% of boards say these new technologies are hard to oversee. Both matters reveal the necessity of having a younger group of members to understand and explain in order to take the essential actions.
Mix it up without losing essential skill
While stating that young blood is important, one should not forget that it is diversity we are looking for. The young will of course learn from the old, but it should also be the other way around.
There might be a worry amongst tenured directors that younger members lack the experience needed. Saying that though, the necessary skills to govern doesn’t always come from a long career. If there are already directors with great experience in the room, why fill boards with members of equal expertise? It might be a good idea to get someone else in to ask the right questions and handle the modern difficulties that corporations face today. Cyber risks ARE present, and boards need to stay on top of it.
To summarise: Diversity will create an open discussion and can help when facing modern issues. Keep the old while also recruiting the young, there’s plenty to learn from one another. Furthermore, consider your new members with an open mind. Not everything is supposed to be as it always were.
“The talent and the ability to bring something unique to the boardroom is often there, it just may not look like what the board is used to.”
– Leah Malone, Director of PwC’s Governance Insights Center, in an interview with Next Gen Board Leaders.
Not done reading? More information on the subject in our article How to welcome the new generation of board leaders.