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Academic Study Finds Fault With Older Independent Directors

Old and In the Way?

A recent study by four professors finds quite a few faults with older directors:

"Specifically, older independent directors are more likely to miss board meetings and less likely to be a member or chair of important board committees. Their presence on corporate boards is associated with higher CEO compensation, poorer financial disclosure, lower total payouts, worse acquisition decisions, and a lower sensitivity of CEO turnover to performance. On average, a greater representation of older independent directors on corporate boards is negatively related to firm performance."

Ronald W. Masulis, Cong Wang, Fei Xie & Shuran Zhang, Directors: Older and Wiser, or Too Old to Govern? (Dec. 2018, available here).  The authors do allow that these negative impacts are somewhat offset by advisory benefits but one can almost hear Regan counseling her father:

"O, sir, you are old! 
Nature in you stands on the very verge 
Of her confine. You should be rul'd, and led 
By some discretion that discerns your state 
Better than you yourself."

W. Shakespeare, King Lear Act II, sc. 4 (matters do not end well for Regan).

The authors classify anyone who is at least 65 to be "older".  Winston Churchill was 66 during the Battle of Britain and was 70 when the World War II ended.  No telling how the United Kingdom, and indeed the world, would have fared had a younger man been in charge!

Note to readers: The reference to "Old and In the Way" is to a short-lived Bluegrass band that included Jerry Garcia, Vassar Clements, David Grisman, Peter Rowan, Richard Greene & John Hartford.  

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