A new report issued by Deloitte's Center for Corporate Governance and the Society of Corporate Secretaries and Governance Professionals noted age limits as the most prevalent mechanism contributing to board turnover, and such limits continue to rise. So it's not surprising that the report found very few boards with directors aged 40 or younger, noting that more than half of companies reported their youngest director to be older than 50. For 53% of all companies, director retirement, which is getting later and later, is the reason for change in board composition.
I have no issue with extending age limits for service. As people live longer and healthier lives, their capacity to remain productive longer is clear. But there is a great need for diversity in the boardroom, and that diversity is stifled when the only reason to change board composition is director retirement. And it is especially stifled when the youngest directors are in their 50s.
For those who are under 40, the world of competition, innovation, markets, workplaces and product cycles are profoundly different from the world in which the over-50 directors grew up. We are all shaped by our earlier years, and we tend to view the world through the lenses that governed our earlier lives. Yet decisions are being made in the boardroom not by those who wish to create the future, but by those struggling to preserve the present. And I know this. I've been there. Years ago.
Back in 1977, I became the youngest outside woman to serve on a major corporate board. I was 28 when tapped, and participated on the board until I was officially elected at 29. The story is, in retrospect, quite humorous.
I had just started my firm and I received a call from Colin Hampton, CEO and chairman of Union Mutual Life Insurance Co., the largest writer of long-term disability insurance. I had done a great deal of innovative social and futurist research for the life and health insurance business working at a trade association since my graduation from college. In the course of my work, I got to know all the heads of the major insurers. I was also considered quite controversial in the industry trade press. Some agents blasted my talks and reports as coming from a young, inexperienced woman who was bent on disturbing an industry that had been successful for over a century. Editors rose to my defense, saying that my beliefs about how technology, for example, would fundamentally change financial services were absolutely on target.
Colin had always circulated my reports and speeches to his management team. He said, “I hear you've started your own consulting firm. I've been looking for over a year for a woman for my board. I have looked at famous women, wives of famous men, academics . . . and I've come to the conclusion that, even though this is a token position, I will not put a token woman in it. You know more about where business is going than anyone I've ever met, so I decided to call you.” Remember, this was almost 40 years ago!
Believe me when I say that I honestly thought he was going to ask me for a recommendation. I searched my mind for the most knowledgeable women I knew in life and health insurance, but back then there were only a few. So I was taken aback when he then asked, “Edie, may I be so bold as to ask you how old you are?” When I told him I was 28, there was a short silence and then he said, “Well, we'll just have to live with that.” I still had no idea what he was talking about. I didn't know anyone who served on a corporate board, let alone a woman and one my age. I was floored when his intention became apparent.
My voice was heard
Did Colin make a wise decision? When Union Mutual wanted to go back into health insurance, I was opposed. I advised the board that the future of health insurance was going to be a nightmare. But we did introduce a product I had imagined and written about several years earlier — long-term care insurance. And we pioneered in that, became the No. 1 underwriter, and until others underpriced it in order to enter the market, ultimately wreaking havoc on the pricing, we were reaping the benefits of that innovation.
When proposals began coming in for us to invest in the first cable TV companies, most of the board opposed. I was one of those who convinced them that cable would become a real competitor of network TV. We made those investments, and profited considerably. When the book Megatrends was published, the insurer's investment team began to defy our investment guidelines, which had been to balance our portfolio regionally in the U.S. They began to believe that the South would triumph over the North, and started pouring money down there. But in my work as a futurist, I saw that things were conspiring to lead to overdevelopment in the South. The companies moving there for the cheap, non-unionized labor would soon find competition from Mexico and then China. Plus: older people were retiring there and needing more infrastructure resources, the federal budget was shrinking for many kinds of infrastructure, water would be a problem . . . and so on. I met privately with the head of investment, and he promised to rebalance the portfolio to the guidelines. He did. Over the next few years, the South did become overdeveloped but we had the lowest problem loan portfolio of all of our peers.
In the mid-1980s, we became the first mutual life insurance company to demutualize. (We became UNUM Corp.) It was a heady and challenging time, being the first in such a big trend. But it didn't seem so big to me, because I was young, and my whole work life was filled with the world of innovation, start-ups, stock and options. One of my closest friends from college was on the founding team of Intel. So it seemed natural to me to fully back the move to reorganize our corporate structure. We led, and all the other majors followed suit.
I'm not writing this to brag about my accomplishments, but to recount the role played by a young woman whose view of the world was decades apart from the over-60 (white) men who served with me on that board. I would hum what to me were golden oldies, like songs by the Four Seasons, and those guys never heard of them. I would show up to board meetings pregnant (another major first in boardroom history), and that helped the company retain its best women executives who also wanted families.
A missing sensibility
Fast forward to today. One would have thought that, although I was an anomaly then, I wouldn't be today. Consider the incredibly fast pace of change, the explosion of 20-somethings who have started companies that have been valued in the billions, the role of social media in making and breaking product, service and marketing strategies, to name only a few of the enormous shifts over the past decade. The young are not just inheriting a world created by yesterday; they are walking away from tradition and making their own rules — and their own empires.
Just like any generation in their 20s and 30s, their world is the world they grew up in. And the 1980s and 1990s marked the birth and expansion of the Internet, the mobile phone, free and cheap file sharing, realistic virtual worlds and massive multiplayer games, constant threats of terrorism, massive climate and weather shifts, financial collapse and the disappearance of millions of jobs, greatly escalating costs of higher education and health care . . . in short, their world is markedly different, and always will be, from those who came before them. But their sensibilities and orientation are absent from the boardroom. And that makes no sense.
If we were to create boards of directors for the first time in 2015, what would they look like? Would the four major standing committees be audit, governance, nominating, and compensation? What does audit mean today? The financials? What about reputation, intellectual property, enterprise risk management, cybersecurity (or, more appropriately, cyberinsecurity), the triple bottom line, global regulation, and ethics? Can we really squeeze all of this into audit and expect to get it right? Especially when some of these are better understood by, and resonate with, those who are under 35? What about compensation? Currently, this committee is tasked with looking at executive comp over the next few years, but what about strategic compensation? What will it take to attract newer, young, more proficient talent? And in a global brains race? And over the next decade? And in a world where it's more important to access minds than own people? Who better to weigh in on this than those who know it best. And most of those are under 35.
An inevitable outcome
In the end, it may not matter if the older board members want much younger directors around the table. That outcome may be inevitable. Persons under 40 are increasingly taking leadership roles in the institutions governed by boards. They are the entrepreneurs who have built billion-dollar empires. They are the technical geniuses who have created the backbones of their companies' futures. They are the new C-suite members who have risen faster than any preceding generation to walk the executive hallways. Many are already in charge of individuals more than 20 years their senior. In organization after organization, the leadership is flipping from the older generations to the younger. Much younger. Not by 10 years, but by over 25. Those in their late 20s and 30s are taking the helm. We have termed this “flip generation leadership.” Because of the burgeoning need for top talent, the flipping of generations is happening faster than expected.
These young leaders will be board material faster than any prior generation. And they will not suffer staid, bureaucratic processes and old boys' networks. More will be women but, unfortunately, still not enough. And many more will have names that represent cultures and countries that are truly foreign to those who occupy the current seats.
Going by my own shortcomings when I was the youngster at the table, they will need mentors and those wiser than them to walk them through the difference between management and the board, the politics of dealing with the CEO, the alliances around issues that need to be developed carefully with other board members outside the boardroom, the function of the board minutes, the need to stick to the agenda, and the proper way to meet separately with management. For the young women, there are even tougher protocols. It gets much easier when there is more than one woman on the board.
And for today's younger leaders, there will also be lessons about the appropriateness of using social media regarding board work, the difference between the speed of innovation versus the slowness of the larger organization, the perceived versus actual culture of the company, and the limits imposed by a decade of conflicting and confusing regulatory and legislative realities. Executive turnover is faster, so succession planning is even more important, and those under 35 will have very different views on that.
But, as with all younger generations, their music will be different, as will be their communication styles, their patience, their heroes, and their priorities. They will hate traditional silos, and want to force collaboration. They will want to know how the company is saving the world. They will bring disruption, fresh air, naïve questions, frustration and more than a few laughs. And they will bring a window into the world to come, as opposed to the world that was. That's what I remember doing. That's what younger people do. And that's why there needs to be more of them — and we can only hope there will be more of them — on boards.