Age Is Just a Number

One's birthdate does not determine whether they possess the skills to help a company succeed.

At our Private Company Governance Summit in June, I conducted a fireside chat with Tom Murphy.  A cofounder of Crestview Partners, Tom has served on numerous private company boards and currently also serves on the board of Berkshire Hathaway, whose stock recently hit an all-time high. Serving on Berkshire’s board with Tom is Warren Buffett, who is 93 years old. When a question about age limits for directors came up, Tom joked that he couldn’t comment.

According to The Conference Board, as of July 2022, 67% of S&P 500 companies had mandatory retirement ages for directors, usually between ages 72 and 75. Proponents of age limits claim that they ensure the board has the current skills and knowledge necessary to understand changing markets and developing technologies. However, age does not determine whether someone possesses the necessary skills to help a company succeed. I’ve served with some older directors who are very up-to-date and insightful as well as with some younger board members who are not.

Unlike many public companies, private companies have a significant advantage in their flexibility to select board members. Many private companies have a smaller number of shareholders who frequently are highly engaged in the business and who often have a deep understanding of the company, its employees, its customers and its suppliers. These shareholders often have a good idea of what skill set the board needs and, as a result, do not need to rely on age limits as a proxy for when a director has become out of touch. Without mandatory retirement ages, these boards can refresh on their own timeline.

As we’ve written in Directors & Boards, a sister publication of Private Company Director, if directors do not have the right experience and a skill set that aligns with the company’s long-term strategy, it is incumbent upon the nom/gov committee or chair to ensure the refreshment of the board. Directors of ABARTA, one of our Private Company Boards of the Year honorees, note that a big part of their board’s success resulted from reviews of both the board in aggregate and of directors individually. These reviews, not age limits, ensure that directors individually and the board as a whole have the right skills and experiences.

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Some boards, especially those of family businesses, see a mandatory retirement age as a tactful way to offboard underperforming directors who are family members and may own a significant part of the company. However, in many cases, these age limits become counterproductive, particularly when the board waits years for a director to reach the age limit rather than offboarding them based upon their performance.

More experienced directors can be especially helpful mentoring new CEOs, members of the management team, and new and younger directors. Some public companies get boxed in by age limits, and their retirement policies present an opportunity for private companies to pick up highly experienced directors who have aged out of their public company boards. Many of these directors seek to remain active and would eagerly embrace the opportunity to serve on the boards of private companies. After all, wouldn’t most boards love to have Warren Buffett as a director?

About the Author(s)

Bill Rock

Bill Rock is the President & CEO of MLR Media.


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