Directors: Older and Wiser, or Too Old to Govern?

67 Pages Posted: 26 Nov 2018 Last revised: 31 May 2022

See all articles by Ronald W. Masulis

Ronald W. Masulis

University of New South Wales, Sydney; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Cong Wang

The Chinese University of Hong Kong, Shenzhen

Fei Xie

University of Delaware - Lerner College of Business and Economics; European Corporate Governance Institute (ECGI)

Shuran Zhang

Hong Kong Polytechnic University

Date Written: May 15, 2022

Abstract

An unintended consequence of recent governance reforms in the U.S. is firms’ greater reliance on older director candidates, resulting in noticeable board aging. We investigate this phenomenon’s implications for corporate governance. We document that older independent directors exhibit poorer board meeting attendance, are less likely to serve on or chair key board committees and receive less shareholder support in annual elections. These directors are associated with weaker board oversight in acquisitions, CEO turnovers, executive compensation, and financial reporting. However, they can also provide particularly valuable advice when they have specialized experience or when firms have greater advisory needs.

Keywords: boardroom aging, older directors, board monitoring, board advising, agency problems

JEL Classification: G34, G32, M43

Suggested Citation

Masulis, Ronald W. and Wang, Cong and Xie, Fei and Zhang, Shuran, Directors: Older and Wiser, or Too Old to Govern? (May 15, 2022). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 584/2018, Available at SSRN: https://ssrn.com/abstract=3284874 or http://dx.doi.org/10.2139/ssrn.3284874

Ronald W. Masulis (Contact Author)

University of New South Wales, Sydney ( email )

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Cong Wang

The Chinese University of Hong Kong, Shenzhen ( email )

Fei Xie

University of Delaware - Lerner College of Business and Economics ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Shuran Zhang

Hong Kong Polytechnic University ( email )

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