More Retired CEOs Being Tapped for Corporate Boards
The average age of directors at U.S. businesses is increasing, partly because current CEOs, who were typically asked to serve on multiple boards, are paring back.
Reuters reported that the average age of independent directors at companies in the Standard & Poor's 500 index stands at 60.8, up from 60 in 1998. That's according to the 20th annual "Board Index" that included 478 companies analysed by Spencer Stuart, the executive search firm.
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Membership on an outside board has become more intense in light of corporate reforms outlined in the Sarbanes-Oxley Act. General Electric Co., for example, tries to restrict their CEOs from sitting on any other boards because they think such outside commitments can take up too much time.
More retired CEOs are therefore being recruited to sit on boards at big companies, said Julie Daum, Spencer Stuart's U.S. board practice leader.
"We have more companies talking about waiving the retirement age or extending it," she told Reuters. Many companies "think it's hard to get directors. If they have people they think are good, they want to hold onto them."
Retired corporate chiefs often bring experience to the table but it's also critical that they have stayed involved with current business matters, Daum said.
Chief Information Officers are finding it hard to get a seat in the corporate boardroom, according to a study by a public-relations firm, Burson-Marsteller, which reviewed Fortune Global 500 companies. It said just 8 percent have a CIO on the board.
Heidi Sinclair, European CEO at Burson-Marsteller told Silicon.com: “After Y2K and the dot-com crash, CIOs went from heroes to dogs overnight and this research shows there's still a fundamental lack of understanding of the importance of technology for businesses.”
In another study on corporate boardrooms, researchers found a link between good governance practices and solid financials.
"There does appear a strong correlation between governance and performance," Gavin Anderson, President and CEO of GovernanceMetrics International, told MarketWatch.
The average three-year total shareholder return for the consistently poorly rated companies was 8.73 percent versus 15.93 percent for the highly rated companies through Sept. 1. During the same period the S&P 500 had an average return of 11.91 percent, the firm said.
GovernanceMetrics also said Tyco International Ltd. has made huge improvements since the firm began rating companies in 2002 when it rated 1.5, "and reflected many of the governance deficiencies associated with the prior leadership," the firm said. This time around Tyco earned a rating of 9.
"It's taken almost three years of progress to get there. It's not like it was overnight," Eric Pillmore, senior vice-president of corporate governance, told MarketWatch. He attributed the progress to a fresh management and board team taking a critical look at the company's governance flaws. "It took a lot of hard work."