Over the past few years there has been much discussion over the need to improve diversity on boards of directors, in both the for-profit and not-for-profit sectors. It is well established that board diversity can contribute to innovation and better corporate governance. Diversity enables boards to deliberate with greater perspective, and significantly expands the available pool of qualified directors.
How diversity is defined, though, is changing. The Institute of Corporate Directors recently defined diversity as including "gender, ethnicity, age, business experience, functional experience, personal skills, stakeholder perspectives and geographic background", with all factors being important.
Traditionally, most directors are mature, experienced and, in many cases, fill this role after retirement or near the later part of their career. The perspective these directors bring to a boardroom is vitally important. Still, age diversity on boards help the corporation to benefit from the different perspectives of different age groups. Age diversity of boards encourages board development and learning, and can foster creativity and innovation, and many studies have found positive relationships between the age diversity of a board and corporate performance.
Age diversity does not mean adding youth to a board simply for the sake of being diverse. Age diversity also does not mean having a board comprised entirely of young directors. Diversity means representation from across age groups. Some corporations may wish to consider adding directors in younger age brackets, while others may wish to add directors able to provide perspective based upon decades of experience around boardrooms or in relevant fields.
The average age of all directors in the S&P/TSX 60 in 2014 was 63, with the majority falling between ages 60 and 69. Approximately 20% of directors were above age 70. Only 6% were 49 or younger, noting that in 5% of cases age was not available.
An Example of a Diversity Policy
Corporations are starting to take note. As just one example, Barrick Gold has stated that it believes that "a board made up of highly qualified individuals from diverse backgrounds promotes better corporate governance and performance and effective decision-making", and that when identifying and considering director candidates they will consider gender, age, ethnicity, disability and the geographical background of the candidate. Barrick's diversity policy is available online at http://www.barrick.com/files/governance/Barrick-Diversity-Policy.pdf.
The Canadian population is diverse. While our corporate and not-for-profit boardrooms will likely never perfectly reflect Canada's demographics, director diversity, be it age diversity or otherwise, can help position any corporation for success now and for years to come. Does your corporation have a diversity policy for its board? If not, perhaps it's worth considering.
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