Contributed By Cowen Partners
Top CEO recruiters at Cowen Partners have contributed this CEO think piece to Boardroom Pulse.
Fifty-seven — the average age of CEOs at companies in the S&P 500, according to a recent CNBC analysis.
While that’s still far from the traditional retirement age of 67, there are multiple cases where executives continue to hold the top posts well into their 70s and 80s.
For instance, Bob Iger, the CEO of Disney, recently took over from his originally planned successor despite his current age of 71. A more extreme example is Warren Buffet, the CEO of Berkshire Hathaway, who is still leading the organization despite being 92.
Of course, there’s no reason to replace a physically and mentally active CEO who continues to add value to an organization despite being well past retirement age; if an 80-year-old CEO can continue to run their company successfully, more power to them.
However, there are identifiable benefits and drawbacks to retaining older executives. Let’s examine them.
Why Companies Retain Older CEOs
Older CEOs are typical in many organizations — not just the most prominent companies that comprise the S&P 500. Here are a few reasons companies retain them in their leadership roles.
Older CEOs Have Valuable Experience
A 60- or 70-year-old CEO has decades of work experience behind them. They’ve seen their organizations through multiple crises, including the COVID-19 pandemic, the Great Recession, the dot-com bubble burst, and the advent of globalization.
Leaders who helped their organizations survive these events learned a lot from them.
Even if they weren’t yet the head honcho, they witnessed their predecessors pick up the pieces and put them back together. They learned the art of resilience and how to lead during times of change and uncertainty.
Aside from experiencing external events, older leaders also saw changes within their organizations.
For instance, Apple is an entirely different company from what it was in the 1990s. They no longer sell only computers, having expanded into developing completely new product lines like the iPhone and the Apple Watch.
Letting go of a CEO who has seen the organization through so many ups and downs is difficult. Their experience can be a significant reason their board prefers them to continue holding the reins.
Lack of Qualified Successors
Sometimes, the reason for holding onto an executive isn’t pure experience; it’s because there is no clear successor. During the COVID-19 pandemic, succession plans ground to a halt at many organizations. There were more important matters to deal with, like sustaining business operations when the entire company worked from home.
When the CDC ended the public health emergency for COVID-19, some companies were still dealing with ongoing repercussions to their business model. As a result, they chose to keep their older CEOs on board because they simply did not have the resources to devote to succession planning.
Of course, older CEOs will need to move on at some point. No one lives forever — no matter how healthy they are. We’ll likely see more CEO transitions over the next few years as organizations recover from the pandemic’s impact and other issues, like supply chain management and economic concerns.
Downsides of Keeping Older CEOs
The above shows that there is undoubtedly an argument for retaining older CEOs. However, there are also some disadvantages to remain aware of.
Older CEOs May Not Understand the Need for DE&I
The outcry for greater inclusivity in the work environment grew in 2020 when conversations around race relations dominated the cultural zeitgeist.
Companies took heed of these concerns, and many adopted DE&I policies that created more diverse hiring practices and established other equity-based initiatives.
While DE&I is certainly welcomed by people from a multitude of backgrounds, more traditional people from the Baby Boom generation — now in their late 60s or 70s — may not fully appreciate the importance or comprehend the lack of diversity in the workplace.
Of course, that isn’t true of all older executives; many are more vigorous supporters of DE&I than 30-year-olds.
However, implementing a DE&I strategy isn’t solely meant for entry-level workers. To be successful, it needs to be integrated into all levels of the business, including the upper echelons.
Less Familiarity with New Technological Developments
Sometimes, people of older generations are slow to adopt new technologies that can benefit their organization. And with technological developments seeming to occur almost daily, it can be difficult for anyone to keep up with the newest invention, tool, or gadget.
However, failing to keep up with the latest technology — or failing to understand its potential uses — can be extremely harmful to an organization. In some cases, the failure to adopt technological advancements can make the company fall far behind its peers.
If your competitors all hop on board with the newest software tool, they have the potential to leave your organization in clouds of dust. The company may see clients go if the change is significant enough, hurting revenue and profits.
Potential for Stagnation
Sometimes, a CEO doesn’t want to leave their post simply because they find the role personally fulfilling. That’s likely the case for Warren Buffet, who essentially built Berkshire Hathaway from the ground up.
However, not all older CEOs will continue to find the same success as the Sage of Omaha. Their skills may become irrelevant, and they may find that their guidance doesn’t carry the weight it did 10 or 20 years ago.
Companies that see their CEOs become obsolete are wise to encourage retirement. They don’t want to run the risk of their organization’s value declining due to untimely advice.
Sometimes, an Older CEO Is the Right Fit
While keeping an aging CEO on board has some pitfalls, it doesn’t always lead to a bad outcome. Sometimes, an older CEO is the most suitable person for the role, especially if they continue to contribute to the organization in ways others simply can’t.
However, having a succession plan in place for future CEOs is critical. That way, organizations avoid disruptions to business operations when it comes time for the CEO to retire.
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