Age Diversity
by Neo Allwood & Paul Johnston, June 2023
Significant progress has been made to improve gender and ethnic diversity in board and senior management positions across UK PLCs; age diversity has been comparatively less well explored.
We interviewed executive and non- executive directors from seven listed and unlisted companies to hear their thoughts on age diversity, understand their experiences and find out how their organisations have benefitted from building boards with wider age ranges. For the purposes of this article, we broadly define ‘younger directors’ as those who have secured either executive or non-executive level group board (or equivalent) appointments at or before the age of 45.
The potential benefits of age diversity
The board is integral to the governance of any organisation and is charged with making decisions on behalf of stakeholders. According to our interviewees, by appointing younger directors, boards are better able to remain cognisant of the ever-evolving social environment in which they operate. Age diversity complements other forms of diversity and helps boards to better understand the needs of their stakeholders.
Providing diversity of thought
Younger professionals will often have different experiences and perspectives compared to older board members. These may be centred around issues which are outside the expertise or comfort zones of more seasoned board members. As one director told us, ‘the way we operate in a digital age is different … and, particularly when it comes to communicating your brand externally, it’s really helpful to have people around the table from different age groups …’.
Age-diverse boards bring together people with different backgrounds and lived experiences that may, for example, better reflect a company’s customer base.
Diversifying the existing skill set
There is an increased onus on companies and boards to respond to technological change. One director highlighted that ‘there tends to be a skills gap around digital transformation, technology innovation and cybersecurity risk, and I think these tend to be areas where younger people have a stronger skill set.’ A majority of those we spoke to echoed this sentiment, with another director stating that ‘the expectation is that young people have lived with ESG and technology for more of their career and are therefore better able to relate to it, apply it and passionately believe it.’
Promoting a culture of learning
The inclusion of younger directors on boards can encourage a culture of learning and personal development. Directors at a relatively early stage of their career tend to display a high level of curiosity along with a willingness to develop the requisite skills; one director told us that ‘younger people on boards tend to be more willing to constantly refresh their skills and learn about emerging areas.’ This attitude can transmit across the board as a whole.
Removing barriers
Despite the potential benefits, there remains a relative lack of stakeholder focus on increasing the representation of younger people on boards.
One possible barrier to more age-diverse boards is that – unlike gender and ethnic diversity – age has not been the subject of independent reviews such as the Hampton- Alexander or Parker Reviews. This has arguably contributed to a lack of focus on the issue, either because of a lack of tangible goals or because of attention being absorbed by other diversity characteristics.
Another potential obstacle is the way in which board-level positions are typically advertised through ‘tried and trusted’ channels. This approach risks unintentionally excluding a large pool of suitably qualified, diverse, younger candidates, making it difficult for first-time prospective directors to get their foot in the door.
Sourcing diverse candidates requires boards to:
Explore non-traditional careers and identify potential and transferrable skills in candidates that will benefit the board in the long term, rather than focusing on whether someone meets a specified criterion. One director told us that ‘it’s about ensuring that organisations are able to identify younger talent earlier on and provide opportunities and the space where they can grow and develop their skill sets …’
Positively challenge their existing executive search firms to expand their candidate pool. Executive search firms ‘have a responsibility to source a young, diverse supply to enable and encourage young people to get onto boards.’ Expanding the candidate pool does not and should not involve any compromise on a candidate’s ability.
One of the NEDs we interviewed noted that their first board role resulted from a network connection, highlighting that it would be beneficial to see ‘more targeted communications and events for younger people roles is advantageous, it can become an obstacle to entry. Organisations must be willing to create opportunities for younger people. One director told us that when he was appointed to an executive role at a relatively young age, his ‘organisation took an educated risk and felt I could fill in the gaps in my knowledge over time; it takes a bit of bravery on the company’s part to do that.’
While there will always be a premium on experience, it may be necessary to challenge the assumption that older board members are always best placed to lead their companies through different business cycles. As one director highlighted, ‘the perception of what counts as experience needs to change.’ Older generations will have more experience to draw on, however, assuming experienced board members remain, the inclusion of younger board members does not compromise this. In fact, it may augment it with new perspectives and insight into different areas such as employee engagement and tech-driven opportunities.
General preconceptions of what a senior manager or director typically looks like persist, and it takes time for these to shift. One possible method for changing perceptions is the adoption of quotas.
Our interviewees generally supported the rationale behind quotas but noted the challenges in practice. Some interviewees highlighted that quotas can quickly turn into tick-box exercises, encouraging tokenism. For quotas or targets to work effectively, the correct culture and attitude toward the underlying aims need to be in place. Organisations must first identify and understand the benefits of multi-generational boards and foster a culture where these could flourish. As one director contended ‘if you just have a quota system, you potentially put young people in a culture that can’t thrive with them, so I think it has to start with the culture of the business.’
There remains more to do in challenging some of the existing structural barriers to greater age diversity on boards. Notwithstanding these, several of the directors we spoke to pointed to the steps that they had taken to support their board- level careers and development. Many of these can be applied as helpful points for career progression in general.
Create opportunities
Your personal business case
Younger people should start thinking about the skills relevant to their target board and ask themselves how they can develop skill sets to add value. LinkedIn is a great source for aspiring directors to build connections with existing NEDs and executive search firms to help bridge the gaps in the skills they need to join boards.
The importance of NEDs being able to offer constructive challenge in a way that is understood and heard by management should not be underestimated, and this is a key skill for any NED. With the need for boards to work constructively together, one interviewee emphasised the advantages of ‘young people equipping themselves with evidence to support their competencies to be able to demonstrate that they can be professionally curious without being critical.’
Similarly, it is important for young people to emphasise the benefits that their potential board roles could bring to their current employment. One director noted how they highlighted ‘the real benefits of my NED role to my employer, as there was a cross- pollination of skills, knowledge and networks that was really advantageous.’ We spoke with one former professional athlete who had pivoted into executive and non-executive work – they emphasised the importance of understanding the transferability of their skills and being able to clearly articulate this.
Create your own opportunities
One director told us, ‘if opportunities do not come knocking at your door, consume yourself with creating your own opportunities and projects.’ Examples of how our interviewees had done this included running their own businesses or pursuing outside projects to equip themselves with strategic experience and illustrate their ability to balance various professional responsibilities.
Be vocal about your goals
‘Show and tell management that you are ambitious; unless you do so, they are left guessing.’ Use appraisal sessions to map out your longer-term career path. One NED said it was important for younger people to consider ‘where they see themselves in a year’s time and what experience they expect to have gained by then.’
Find a mentor
This can be both in preparation for a non-executive role and upon taking a non- executive role. One respondent told us, ‘having a mentor along the way helps with the development of a NED and does not in any way compromise the organisation.’ In our discussions, it was often highlighted that directors are not always experts in their current fields so it is important for young directors to identify formal or informal qualifications in areas where their target boards are looking to close skills gaps: for example, ESG, cybersecurity and digital transformation.
Support diversity on boards
Company secretaries are often well placed to encourage and facilitate their organisations and chairs to foster a culture that can better support diverse boards.
First, they should seek opportunities to develop their networks to understand what executive and non-executive recruitment agencies there are, the ways in which their approaches differ and how they support diversity. When the board is looking at new appointments, governance professionals should be in a position to advise on the pros and cons of alternative recruitment methods.
Second, governance professionals should be working with boards to ensure that section 172 considerations are truly embedded within board discussions and decision-making. This should highlight not only which stakeholders are key to the board and to the company, but the ways in which the board has access to the voice of those stakeholders. This may in turn prompt a discussion on board composition and processes. Likewise, regular board evaluations should include review of both board composition and skills, and whether these remain appropriate both for the current and future strategy of the company.
Third, governance professionals should look to ensure that culture is a regular item on board agendas. Getting the right culture is fundamental to enabling some of the discussions and career pathways that facilitate diverse boards.
Governance professionals should encourage boards to develop board diversity policies. Such policies are helpful both from the point of view of generating a tangible and public commitment to diversity and inclusion and prompting conversations about the diversity targets the board needs to set.
Finally, we discussed junior boards with our interviewees. Governance professionals can support their boards by raising awareness of the potential value that a junior board can bring to an organisation. For junior boards to be effective, they will need a clear remit and reporting mechanism to the group board. There is scope however for junior boards to be an additional mechanism for creating a space for diverse perspectives and experiences to be brought into the decision-making process.
ONE Advisory’s Corporate Governance, Compliance and Company Secretarial team’s expertise and knowledge of best practice in small and mid-cap growth companies can ensure that your board receives the advice and support needed to facilitate good corporate governance.
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