A recent board shakeup at Hess Corp. (NYSE:HES) had tenure at the core of the controversy. Elliott Management fought hard to replace three directors at the firm. BusinessWeek reported that Hess Corp. (NYSE:HES) had the 10th-oldest board in the S&P 500, and the average age of directors was 69.
The Coca-Cola Company (NYSE:KO) has added some new blood to its board this year, but it’s historically had staggering tenure. Three of its directors have served for more than 30 years, and two others have been around for two decades. In a step in the right direction, though, two The Coca-Cola Company (NYSE:KO) directors in their 80s didn’t stand for reelection this year; it seems like a great age to retire.
Earlier this year, the oldest director in the S&P 500 relinquished his post at 96 years young. Mortimer Caplin had served on the board of directors of Danaher Corporation (NYSE:DHR) since 1990. It’s wonderful to see Bloomberg’s report that he planned to direct all his post-retirement time to things he feels passionate about: tax law (somebody’s got to love tax law) and the University of Virginia. Still, while octogenarians have great insights from decades of life, it’s less likely they have the greatest insights into the modern, evolving marketplace.
Flash forward or flash in the pan
Many people counter the pro-diversity debate with the pro-experience argument. While experience is important, in certain areas of our society, decades of experience equates to residing on the very top of the ivory tower. You can’t see much of what’s going on down in the real world from up there.
Women and minorities have made major inroads in the last several decades in corporate America. Many possible candidates are younger, with less traditional experience, but we should get creative and inject more of them and their insights into board composition. Although all candidates may very well be residing on some level of the “ivory tower,” those who are on the upward trajectory can still see what it’s like to be a regular person in the marketplace. Corporate boards need such different viewpoints to make discussion and discourse real.
What can we shareholders do? We can pay attention to our proxy statements, and vote against directors who have been serving for decades, or may have become, shall we say, overripe. We can also vote for proxy access, and stand in favor of declassifying boards, so directors are all up for reelection every single year.
Tired boards are stuck in the past, and cognitive diversity improves groups and cause more robust discourse. Successful investing relies on managements and boards that are preparing for the future, not focusing on the past.
The article Snoozing Boards Can Stunt Your Stocks originally appeared on Fool.com.
Alyce Lomax has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola.
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