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

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

Ronald Masulis, Cong Wang, Fei Xie, Shuran Zhang

Series number :

Serial Number: 
584/2018

Date posted :

November 21 2018

Last revised :

April 12 2019
SSRN Share

Keywords

  • boardroom aging • 
  • older directors • 
  • Board monitoring • 
  • board advising • 
  • agency problems

An unintended consequence of recent board governance reforms in the U.S. is that firms increasingly tap into the pool of older director candidates, causing their boards to become substantially older. We investigate the board aging phenomenon and its implications for corporate governance.

We find evidence of both monitoring deficiencies and advisory benefits associated with older independent directors. Specifically, older directors weaken board oversight in acquisition decisions, payout policies, 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. 

Authors

Research Member
School of Banking and Finance, Australian School of Business
Real name: 
Cong Wang
Real name: 
Research Member
University of Delaware, Lerner College of Business and Economics
Real name:
Shuran Zhang