Millennials represent the largest generation ever, yet few of them serve on the boards of companies. This is a huge missed opportunity for companies, who perhaps haven’t yet realized the myriad ways having a young perspective can benefit both their brand and their business model.
In 2013, the median board age of S&P 500 companies was 63 years, a slight increase from previous years, according to the Spencer Stuart Board Index. In the same year, the average age of non-executive directors in FTSE 350 companies was 59.7. Starbucks, which has 33-year-old Clara Shih, CEO of Hearsay Social, on its board, is an example of the rare exception to this trend.
Board appointments are often made so companies can benefit from the members’ business experience. Historically, people have assumed business experience can only be gained with age. This, however, is not always the case. An obvious but important example involves the technology literacy gap.
According to a 2013 study from Georgia Institute of Technology and International Telecommunications Union in Atlanta, for instance, nearly 96% of American millennials are digital natives. In many other countries, youth are three times more likely than other age groups to be online. Being tech savvy comes with many advantages, including the ability to build and maintain relationships over social media. About 66% of Middle East and African population is under 30, compared with 52% in Latin America and 48% in Asia.
Having a homogenous (and elderly) board can also create a disconnect between the average member and the demographics of potential loyal customers. This is particularly true when we look internationally. Many Fortune 500 companies, for example, have international operations beyond developed markets. According to Euromonitor International, as of 2012 about 66% of Middle East and African population is under 30, compared with 52% in Latin America and 48% in Asia. As these markets expand, their potential customer base grows younger and younger—it is simply good business sense to have board members who can relate to this massive pool.
By the same token, gender diversity on boards is essential. According to the Catalyst Bottom Line Report, on average Fortune 500 companies with more women board directors actually experience higher financial performance. Specifically, companies with higher percentages of women board directors outperformed those with less by 53% for return on equity, 42% for return on sales and 66% for invested capital.
But while the immediate impacts are important, future benefits are just as promising. Offering young people the chance to be on a board can position them to be better leaders later in life. I was lucky enough to experience this first-hand. At age 28 I was appointed to the Amistad Commission, created by New York’s Legislature to review state curriculum regarding the slave trade. It gave me an invaluable opportunity to shape education policy for future generations of New Yorkers in a knowledgeable, passionate environment.
Building a strong crop of future leaders is a clear win for the corporate world, but there are civic considerations as well. A 2014 study by Deloitte showed that 63% of them donate to charities and 43% actively volunteer or are members of a community organization or nonprofit. The bottom line is, to keep up with the ever changing market trends, companies need to diversify their leadership.
Of course, with such a small sample size it’s hard to tell just how significant the youth factor is for companies’ bottom lines. Where we see the highest number of young board members is in small non-profits and start-up companies, in large part because many of these types of organizations are started by youth who naturally seek out the counsel of their peers. We need more studies to better understand the value and impact of young board members in these various industries, but given the clear evidence that diversity overall is better for business, it makes sense that age diversity would also pay dividends.
Unfortunately, there is no quick fix to the current lack of representation. Diversity of diversity’s sake helps few. Instead, companies need to intentionally and thoughtfully recruit and select young board members who are qualified, responsible, and ready to bring a new perspective to the table. Then, like any member, youth board members should be made aware of their fiduciary duties and be held accountable.
Although it may take time to change the board nomination culture, progress may be coming faster than traditionalists believe. The bottom line is, in order to keep up with the ever changing market trends, companies need to diversify their leadership, not only by increasing the percentage of women, but also by adding—and listening to—more young people.