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

70 Pages Posted: 26 Nov 2018 Last revised: 7 Oct 2021

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: September 21, 2021

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 and its implications for corporate governance. We document that older independent directors exhibit poor board meeting attendance, are less likely to serve on or chair key board committees and receive less shareholder support in annual elections. We find that their presence is associated with weaker board oversight in acquisition decisions, CEO turnover, executive compensation, and financial reporting. However, they provide valuable advisory services when they have specialized experience and when managers have a greater need for board advice.

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? (September 21, 2021). 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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Shuran Zhang

Hong Kong Polytechnic University ( email )

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