Corporate America's boardrooms have long been criticized for being too old, too white and too male. But while the race and gender makeup of corporate boards have come under scrutiny in recent years — with shareholders pushing companies to add women and minorities and the media calling out board homogeneity when companies try to tout equal pay — the age part of the “old boy's club” stereotype has gotten far less attention.
A new report from professional services firm PwC shows just how little age diversity there is among these pivotal figures who govern America's largest corporations. Directors younger than 50 make up 6 percent of the seats on S&P 500 boards — drop the age to 45, and it's less than 2 percent. There are more directors 75 or older than those 50 or younger. And only a third of companies in the S&P 500 have at least one director younger than 50 who is not also the company's CEO.
The report points to recent data from executive search firm Spencer Stuart, which even shows that the average age of a corporate director has gone up over the past decade, from 61 in 2007 to 63 in 2017. And it's also worse in the United States than elsewhere: Here, about 21 percent of directors are 70 or older; in other countries, that number is 10 percent.
That could start to shift, however, as companies are finally waking up to the benefit of having younger directors in the room.
“It's in the last 24 months, really, when [younger directors] have really popped in interest,” said Paula Loop, who leads PwC's Governance Insights Center. “We're seeing a lot more focus around technology, cybersecurity, digital transformation, and understanding social media and other ways of marketing.” To get “fresh skills that are current today, it's going to be a sitting executive who can provide insight into what is going on in their day jobs,” and those tend to be somewhat younger.
They're also increasingly recognizing how big a risk viral stories can be — the Starbucks incident in Philadelphia is only the most recent example — making directors with social media expertise more valuable in the boardroom.
“What you hear first is a desire for candidates with that 'digital native' in their profile,” said Theodore Dysart, a vice chairman for the executive search firm Heidrick & Struggles. But “if you go and try to find someone who's an expert on social media, by definition, they're in their 30s or 40s at the high end. You can watch nominating committees start to squirm in their seat thinking about bringing people of that age in.”
Meanwhile, the huge wave of millennial consumers is starting to reach prime buying years, making familiarity with that group essential. And fewer sitting chief executives are serving on multiple boards as demands of the job have grown, forcing directors to look for younger nominees. As boards increasingly try to fill seats with more women and minorities, that's also likely to push the age of new directors lower, as the number of women and minorities in the most senior corporate roles remains stubbornly low.
PwC's own survey of corporate directors last fall shows that despite the lack of attention about the issue, 90 percent of directors say age diversity is important — more than said the same about either gender or race. And indeed, some companies have been adding younger directors: For instance, Kimberly-Clark elected OpenTable chief executive Christa Quarles, now 44, to its board in 2016; her next-youngest colleague is 53, according to the company's most recent proxy.
Last week, Estée Lauder elected Jennifer Hyman, the 37-year-old chief executive of Rent the Runway, along with Jennifer Tejada, chief executive of PagerDuty, 47, to its board, bringing its number of directors younger than 50 to four. This is Hyman's first public-company board seat, and she said in an interview that she believes established companies are starting to turn to younger voices for their experience leading disruptive companies with less hierarchical workplace cultures.
“It was clear that they wanted to bring diverse and disruptive voices onto the board,” Hyman said. “When you are younger and you've had a less-established career, you tend to think more in the white space of an industry instead of what can never work.”
Many companies haven't been waiting for other directors to leave, instead increasing the size of the board to add directors in their 40s or 50s: 62 percent of younger directors were added that way, PwC's analysis found. But Dysart said the desire for younger board members is even part of why some companies are changing their governance policies and setting up term limits for directors.
As that happens, he said, “I think people will get more comfortable with leaders who are a little younger.” Up until now, companies without them who “brought someone in at their 40s is thinking that person could be on the board for 30-plus years.”