Written by Connor Sheldon, Blue Sky Graduate Assistant and Class of 2018 Career Track MBA Student
Research indicates that more diverse boards perform better (1). Inviting younger, more diverse, voices to the boardroom table could prove to be a wise investment. Currently, the median age in the United States (US) is around 37 years-old, while the median age of S&P 500 board directors was 63-years old (2,3). In 2016, the Wall Street Journal published a report on the board demographics of the S&P 500 and only two boards, Facebook and TripAdvisor, had a median board member age less than 50 years old. Individuals serving on boards today often have a long tenure of experience and success, and while it is important to have experience and some “wins”, it is also important to integrate fresh ideas and invite new voices to boardroom tables. Should we be examining the lack of age diversity on boards as a potential opportunity?
In 2011, Starbucks invited then 29-year-old technology entrepreneur Clara Shih to join the board. Student loan and financial services provider Navient also invited a 39-year-old to serve on their board of directors. These examples of board service are important because they illustrate companies’ understanding of their target markets. Navient probably took into consideration the lack of 60 year-olds applying for college loans, and Starbucks is utilizing Clara Shih’s core competencies to connect with customers digitally. These examples do not prove that younger board members are the only innovative decision makers serving on boards, however they provide evidence that differences in age, experience, and perspective can prove advantageous in generating customer solutions and financial return when individuals are given the opportunity to be heard.
A 2003 study found a significant positive relationship between the percentage of women or minorities on boards and firm value (4). Further, board diversity can influence financial performance as well as reduce the occurrence of groupthink, a phenomenon that occurs “when one or two people or personality styles dominate a group’s culture so completely that there is no room for those with other styles, perspectives, needs, or beliefs to get their ideas on the table (5).”
At the collegiate and university level, the Association of Governing Boards of Universities and Colleges cited 68.5% of university and college board members are over the age of 50 years-old, while the primary consumers of higher education, i.e. students, are generally 18-25 year-olds (6). These board demographics demonstrate the lack of age diversity is not just a function of private sector practices, and that an opportunity exists to recruit younger members to college and university boards.
Millennials, individuals born between 1982 – 1997, are the largest living adult generation in the United States fully occupying labor force and voting ages (7). Additionally, Millennials are the most racially and ethnically diverse demographic in the US and they act as a resource for implementing diversity and inclusion initiatives (8). In short, Millennials are leaders and decision makers who possess racially and ethnically diverse experiences, and now is a great time to start thinking about inviting young members to sit at the board table.
Below are a few ways to get started.
- Invest in building a pipeline of young talent. There are organizations already working to build the skills of young talent to be effective board members. The Boise Young Professionals’ annual B On Board training educates young professionals about board service. Plug into this event or others like it to support efforts and to leverage others’ expertise recruiting and developing future board members.
- Review board bylaws to determine whether current governance standards support diversity. Boards typically have bylaws outlining the skills and experiences required of board members and even if they are not codified in the bylaws, they often exist implicitly. Have an open and honest debate about the value of bringing younger, more diverse perspectives on to the board, especially if your company or organization targets younger demographics as customers or employees. If they do not already exist, explore the idea of board term limits, as the practice ensures that boards are periodically refreshed with new members, and board member on-boarding is regularly practiced, opening space for younger, more diverse members to join.
- Create opportunities on your board for younger leaders. Starbucks and Navient choose to appoint two young board members to the Board of Directors. However, there are other pathways to include younger, more diverse perspectives. For example, you could create a “board fellows” opportunity that solicits or seeks young people for a non-voting position on the board for a set period of time. Another approach is to recruit younger members to serve on board committees to gain their perspective and experience, and to build skills and knowledge before nominating them to becoming full members of the board.
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References:
1. http://library.pcw.gov.ph/sites/default/files/corporate%20governance,%20board%20diversity.pdf
2. https://www.census.gov/library/visualizations/2017/comm/median-age.html
3. http://graphics.wsj.com/boards-of-directors-at-SP-500-companies/
4. http://library.pcw.gov.ph/sites/default/files/corporate%20governance,%20board%20diversity.pdf
5. https://journals.lww.com/jphmp/Fulltext/2007/11000/Creating_Thought_Diversity__The_Antidote_to_Group.21.aspx
7. http://www.pewresearch.org/fact-tank/2018/04/03/millennials-approach-baby-boomers-as-largest-generation-in-u-s-electorate/
8. https://www.census.gov/newsroom/press-releases/2016/cb16-107.html