“Each year, PwC’s Annual Corporate Directors Survey offers a glimpse into the minds of nearly 900 corporate directors as they weigh in on key governance topics—from shareholder activism and engagement to board composition and strategy oversight.
For several years now, the survey’s Board Diversity section has asked directors to consider various elements of diversity (e.g., gender, race, tenure) and to indicate the extent to which each contributes to diversity of thought (see below). For the first time, age diversity was added to the questionnaire, and the response from today’s directors was certainly noteworthy.
Ninety percent of directors indicated that age diversity was either “very” or “somewhat” important in achieving diversity of thought, which was on par with both gender and tenure. While these numbers reflect the current trends we’re seeing in board recruitment, it’s hard to imagine the numbers being this high even two to three years ago…
We caught up with Leah Malone, Director with PwC’s Governance Insights Center, to provide some context to the survey results and to better understand what she’s seeing in today’s boardrooms.
Q&A with PwC’s Leah Malone
Q: I believe this is the first year we’ve seen age diversity discussed in the Annual Corporate Directors Survey report. Why was it added?/ Why has diversity of age become a discussion point for today’s boards?
Leah Malone, Director, PwC’s Governance Insights Center
The issue of diversity on boards has been gaining attention for several years. Often, the term “board diversity” is used as shorthand to talk about women and people of color serving on boards. But board diversity is about more than just that.
The value of diversity is the value of bringing together different viewpoints. That’s why we asked directors about the relative importance of different factors in achieving that diversity of thought, and we listed a variety of choices. We suspected that diversity of age would play a pretty important role, but even we were surprised to find that 90% of directors say it is very or somewhat important in achieving diversity of thought.
With Millennials, boards today are confronting the maturation of the largest generation ever in the US – even bigger than the Baby Boomers. And they are wondering if they are prepared. Studies show that Millennials have different spending habits, different priorities, different communication tools and a different view of their future than the generations that came before. And as they are about to reach their prime earning and spending years, businesses need to be ready to adapt. Having a younger director on the board by no means guarantees that the company will “understand Millennials,” but it can help to bridge the gap.
Q: Tenured directors often worry that younger directors don’t possess enough business/operational experience beyond their area of expertise (e.g., cybersecurity, ecommerce). As you’ve interacted with boards, what’s been your experience with the talent pool of next-gen directors? Should boards be thinking differently about the ways younger directors can contribute?
As directors really focus on the idea of board diversity and effective board refreshment, they are rethinking what skills and experience they really need on their boards. Yes, the board needs industry expertise. But does every director need to have multiple decades of experience in the industry? No – especially if you already have directors in the room who can bring that experience to bear. What directors really need to be able to do is to ask the right questions. That could mean that they have deep business or operational experience, or it could mean that they bring valuable insight into marketing issues, human capital management, Millennial spending habits, technology or other areas of expertise. The talent and the ability to bring something unique to the boardroom is often there, it just may not look like what the board is used to.
The bigger issue that we see is that many of the most talented members of this pool of potential directors are simply not interested in serving. They are in the peak of their careers, working harder than ever, often with young families and other responsibilities. For many, it’s not that they aren’t qualified enough to be part of the talent pool – it’s that they are too busy to even jump in.
Q: We’re curious about your take on this statement from the 2017 report: “More than half (52%) say their boards already have age diversity and don’t need more—despite only 4% of directors at companies in the S&P 500 being under the age of 50.” Do tenured directors have a more limited view of what age diversity entails? Or do they feel that once they recruit a “digital director,” they’ve covered their bases?
I think there are two factors at work here. First, age diversity is inherently difficult to define. We use a statistic about the number of directors under age 50, but that is a somewhat arbitrary number. We see boards where the age span between directors is 25 or 30 years, yet every director is over the age of 50. Does that qualify as diversity of age? You could also have a board where every director is between 45 and 55. That would be a young board, but it is not actually diverse in age.
The second issue also relates to a definitional problem – at what point have you achieved “diversity”? Does having one woman director bring gender diversity? Does having one person of color bring racial diversity? Many directors would say yes, and that idea is certainly part of what is at work here. When we talk about these issues with clients, we encourage the idea that it takes more than one person from any particular demographic group to really bring diversity of thought.
We look forward to following this aspect of PwC’s Annual Corporate Directors Survey from year to year. To access the full report, click here.”