Last month, the Wall Street Journal published an article documenting a phenomenon that should cause pause for those concerned about effective corporate governance: the graying of corporate boards. Many publicly traded companies, citing a shrinking pool of experience and unproven and risky newcomers, have raised mandatory retirement ages to hang on to board members, typically male, typically white, who are well into their 70’s and beyond.
When German luxury automaker BMW showed its 60 year-old director the door in 2006, wary that a company that desired to anticipate “tomorrow’s auto technology today” would have a hard time doing that with “an elder statesman,” the forced out executive complained because “he liked being the captain of the ship.” In the United States, it appears that this BMW executive may have had the mandatory retirement age elevated in order to allow him to remain as “captain of the ship” despite bylaws and corporate statements that call for mandatory retirement at a certain age.
Critics of elevating retirement ages to keep older executives around longer note that longtime directors are more susceptible to losing their outside perspective. Further, critics note that restricting the “up and out” of mandatory retirement makes it harder to bring in fresh corporate oversight amongst entrenched executives, suggesting that the entrenched are less responsive to shareholder concerns, Finally, increasing the retirement age just pushes back the difficult day when leadership must tell these old, proud executives that they have outgrown their usefulness.
In light of the recent financial market crisis, logic would seem to dictate that new blood is needed on Wall Street, enabling fresher vision and less reckless leadership. It appears that Wall Street has not received this message, as many companies are manipulating their own retirement rules to keep oldtimers around to fill their board seats.