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

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