Age and wisdom: when it's time to move on

Age is often cited as a determinant of suitability for office. Youth is associated with inexperience and advanced years suggesting impending obsolescence.
Remember the debate about the ages of the respective US presidential candidates: the grizzled war veteran and seasoned senator and the young upstart with more modest experience but the audacity of hope?
There may be a common belief that boards become less effective as the average age of members rises but research reveals that this is spurious. Age can be an asset, but so can youth.

Effective boards self-regulate and periodically rejuvenate themselves. A managed turnover of board members ensures continuity of function and retention of institutional knowledge while avoiding staleness. Exemplary boards comprise members whose combined expertise matches current strategic and industry skills requirements and whose behavioural competencies suit the operating culture.
This matching and honing of skills should result from a commitment of board members to rigorous self-assessment.
A director who becomes predisposed to a particular way of thinking and loses the independence of mind and acuity that is essential in a high-performing board member, should move on. When evaluation processes are in place, an under-performing director can be identified and encouraged to improve or resign. In a recent report to Parliament’s Commerce Committee, the Registrar of Companies criticised some independent directors of failed finance companies for lack of interest. Similarly, limited board member understanding of a company’s business, as evidenced by many Wall Street bank directors' failure to fully comprehend the increasingly complex and diverse financial instruments, is to be avoided.

An effective board is one that is competent, independent and engaged, one that needs the right skill-set at the right time. Whenever a member retires there is an opportunity not only to replace but also to review and refresh.
A lack of feedback is self-destructive. Similarly, a board that waits for natural attrition to remove a deficient director is probably a poor-performing board in other respects. The Companies Act 1993 disqualifies persons under18 years of age from being a director but the Human Rights Act 1993 has removed an upper age limit. Many companies, however, have adopted retirement and rotation policies.

New Zealand has, or faces a director deficit. A Waikato University Management School study in 2008 estimated that in the next five years New Zealand companies are going to need 10,000 independent directors. A mandatory retirement age could actually compound a skills shortage. Last year, an ANZ survey found that a leadership gap may be developing because the majority of owners in its study of privately owned businesses with turnovers of $5 million to $150m were baby boomers. The Generation X succession group is much smaller. Just 8.6 per cent of private-sector company directors in New Zealand are women.

The central resource in governance is the wisdom that board members bring to the boardroom. Eliciting this wisdom on the right issues at the right time and in the right form, is not easy but is essential for a board to be effective.

Even in the best companies, things do not always go well. Crises develop; the death or sudden departure of the CEO; discovery of a serious fraud; a downturn in the market putting pressure on bank borrowings.
Well run companies usually know how to deal with such issues, but most important is the application of wisdom and insight. Psychologists have defined wisdom as the co-ordination of ‘knowledge and experience’ and ‘its deliberate use to improve well being’.
In that sense age is immaterial and growing old is no more than a bad habit which a busy person has not had time to form.