The lack of young NEDs and the potential causes of it
February 24, 2023
For 31 years MM&K has conducted an exclusive Chair and Non-Executive Director Survey (Life in the Boardroom), which covers directors’ fees and time commitments, as well as their views on a range of current board issues, which are important to them.
In the last issue of the report – Life in the Boardroom 2021/22, we have reported, that out of 885 boardroom positions surveyed only 2% were representing the below 40 and 40-44 age groups. Another 4% of respondents were aged between 45-49. Our findings correlate with other market surveys; the UK Spencer Stuart Board index reports an average age of NEDs in FTSE 100 as 59.9 years in 2022 and 65 years for chairs.
In terms of pay differentials, there are no conclusive statistics to suggest that there is a difference in pay based on age. For further information regarding pay differentials please refer to one of our previous articles: “Life in the Boardroom – does length of service and age impact NED fees?”
So, why are there so few NEDs aged below 50; are there unofficial “barriers to entry” or is it just a natural progression?
When looking to appoint someone, Boards are looking for experience. Thus, naturally, older candidates will have more business experience. They are; likely to have been through various economic cycles and to have acquired extensive experience as executives. But this does not mean that younger NEDs will be unable to add value to a Board. Younger NEDs bring fresh perspective, modern approach and may be closer to customer trends and requirements. They would also bring their technical expertise in their area of specialty.
Appointment processes might also be perceived as a hurdle. Based on our 2021/22 Report, 45% of appointments were made via personal contacts (i.e. appointee was a personal contact of an Executive or Non-Executive Director); while another 11% were appointed via an introduction.
Further information and data on the pay of NEDs and chairs in firms of all industries and sizes, on how they use their time, their opinions, their pandemic experiences and more can be found in our 70+ page report on 885 boardroom positions.
*Please note that in this article, ‘NEDs’ refers to both non-executive directors and chairs