AllianceBernstein's Case for Multigenerational Corporate Boards
AllianceBernstein's research suggests that multigenerational corporate boards may offer unique business advantages. Despite only 5% of board directors being under 50, age-diverse boards correlate with improved operational performance and shareholder returns. Key findings include:
1. Generation X directors linked to better financial performance, especially in R&D-intensive firms.
2. Greater age diversity on bank boards associated with higher-quality earnings reporting and reduced loan issues.
3. Multigenerational boards facilitate smoother leadership transitions and expand future leader pools.
4. Companies with the greatest board age variance produced the strongest annualized returns from 2017-2023.
5. Age diversity appears most valuable in innovation-oriented sectors like technology and healthcare.
While director qualifications remain paramount, AllianceBernstein argues that age diversity on corporate boards warrants closer attention from investors and companies alike.
La ricerca di AllianceBernstein suggerisce che i consigli aziendali multigenerazionali possano offrire vantaggi unici per le imprese. Nonostante solo il 5% dei membri del consiglio sia under 50, i consigli con diversità di età si correlano con un miglioramento delle performance operative e dei rendimenti per gli azionisti. I risultati chiave includono:
1. I direttori della Generazione X sono collegati a migliori performance finanziarie, specialmente nelle aziende ad alta intensità di R&D.
2. Maggiore diversità di età nei consigli bancari è associata a reportistica sui guadagni di qualità superiore e a una riduzione dei problemi di prestito.
3. I consigli multigenerazionali facilitano transizioni di leadership più fluide e ampliano i pool di futuri leader.
4. Le aziende con la maggiore variabilità di età nel consiglio hanno prodotto i ritorni annualizzati più forti dal 2017 al 2023.
5. La diversità di età sembra essere più preziosa nei settori orientati all'innovazione come tecnologia e sanità.
Sebbene le qualifiche dei direttori rimangano fondamentali, AllianceBernstein sostiene che la diversità di età nei consigli aziendali meriti un'attenzione maggiore da parte degli investitori e delle aziende.
La investigación de AllianceBernstein sugiere que los consejos corporativos multigeneracionales pueden ofrecer ventajas comerciales únicas. A pesar de que solo el 5% de los directores de la junta tienen menos de 50 años, los consejos de diversidad de edades se correlacionan con un mejor rendimiento operativo y mayores retornos para los accionistas. Los hallazgos clave incluyen:
1. Directores de la Generación X vinculados a un mejor rendimiento financiero, especialmente en empresas intensivas en I+D.
2. Mayor diversidad de edad en los consejos bancarios asociada con reportes de ganancias de mayor calidad y reducción de problemas de préstamos.
3. Los consejos multigeneracionales facilitan transiciones de liderazgo más suaves y amplían las reservas de futuros líderes.
4. Las empresas con la mayor variabilidad de edad en la junta generaron los retornos anualizados más fuertes de 2017 a 2023.
5. La diversidad de edad parece ser más valiosa en sectores orientados a la innovación como tecnología y salud.
Si bien las calificaciones de los directores siguen siendo primordiales, AllianceBernstein argumenta que la diversidad de edad en los consejos corporativos merece una atención más cercana por parte de inversionistas y compañías.
AllianceBernstein의 연구에 따르면 다세대 기업 이사회는 독특한 비즈니스 이점을 제공할 수 있습니다. 이사회 구성원 중 5%만이 50세 미만임에도 불구하고, 연령 다양성이 있는 이사회는 운영 성과와 주주 수익 개선과 연관되어 있습니다. 주요 발견 사항은 다음과 같습니다:
1. X세대 이사들이 R&D 중심 기업에서 재무 성과 개선과 연결되어 있습니다.
2. 은행 이사회에서의 높은 연령 다양성이 더 높은 품질의 수익 보고 및 대출 문제 감소와 관련이 있습니다.
3. 다세대 이사회는 더 원활한 리더십 전환을 촉진하고 미래 리더의 풀을 확대합니다.
4. 이사회의 연령 변동성이 가장 큰 기업이 2017년부터 2023년까지 가장 강력한 연환산 수익을 창출했습니다.
5. 연령 다양성은 기술 및 의료와 같은 혁신 중심 산업에서 가장 가치 있는 것으로 보입니다.
이사의 자격이 여전히 중요하지만, AllianceBernstein은 기업 이사회에서의 연령 다양성이 투자자와 기업 모두의 더 많은 관심을 받을 가치가 있다고 주장합니다.
La recherche d'AllianceBernstein suggère que les conseils d'administration multigénérationnels peuvent offrir des avantages commerciaux uniques. Bien que seuls 5 % des membres des conseils d'administration aient moins de 50 ans, la diversité d'âge des conseils est corrélée à des performances opérationnelles améliorées et à des rendements pour les actionnaires. Les résultats clés comprennent :
1. Les directeurs de la génération X sont liés à de meilleures performances financières, en particulier dans les entreprises axées sur la R&D.
2. Une plus grande diversité d'âge au sein des conseils bancaires est associée à un reporting des bénéfices de meilleure qualité et à une réduction des problèmes de prêt.
3. Les conseils multigénérationnels facilitent des transitions de leadership plus fluides et élargissent les pools de futurs dirigeants.
4. Les entreprises ayant la plus grande variabilité d'âge au sein du conseil ont produit les rendements annualisés les plus forts de 2017 à 2023.
5. La diversité d'âge semble particulièrement précieuse dans des secteurs orientés vers l'innovation tels que la technologie et la santé.
Bien que les qualifications des directeurs restent primordiales, AllianceBernstein soutient que la diversité d'âge au sein des conseils d'administration mérite une attention particulière de la part des investisseurs et des entreprises.
Die Forschung von AllianceBernstein legt nahe, dass multigenerative Unternehmensvorstände einzigartige geschäftliche Vorteile bieten können. Obwohl nur 5 % der Vorstandsmitglieder unter 50 Jahre alt sind, korrelieren altersdiverse Vorstände mit verbesserten Betriebsleistungen und Renditen für die Aktionäre. Zu den wichtigsten Ergebnissen gehören:
1. Vorstandsmitglieder der Generation X sind mit besserer finanzieller Leistung verbunden, insbesondere in forschungsintensiven Unternehmen.
2. Größere Altersvielfalt in Bankvorständen ist mit qualitativ hochwertigeren Gewinnberichten und reduzierten Kreditproblemen verbunden.
3. Multigenerative Vorstände erleichtern reibungslosere Führungswechsel und erweitern die Auswahl zukünftiger Führungskräfte.
4. Unternehmen mit der größten Altersvariabilität im Vorstand erzielten von 2017 bis 2023 die stärksten annualisierten Renditen.
5. Altersvielfalt scheint vor allem in innovationsorientierten Sektoren wie Technologie und Gesundheitsversorgung besonders wertvoll zu sein.
Obwohl die Qualifikationen der Vorstandsmitglieder nach wie vor von entscheidender Bedeutung sind, argumentiert AllianceBernstein, dass die Altersdiversität in Unternehmensvorständen eine genauere Betrachtung durch Investoren und Unternehmen wert ist.
- Research indicates multigenerational boards correlate with improved operational performance and shareholder returns
- Companies with the greatest board age variance produced the strongest annualized returns from 2017-2023
- Age-diverse boards associated with higher-quality earnings reporting and reduced loan issues in banks
- Multigenerational boards facilitate smoother leadership transitions and expand future leader pools
- Only 5% of board directors are under the age of 50, indicating a lack of age diversity in current corporate boards
Insights
This research on board age diversity presents intriguing findings for investors. The correlation between multigenerational boards and improved financial performance, particularly in R&D-intensive sectors, is noteworthy. Companies with directors spanning a 30+ year age range showed stronger annualized returns compared to those with less age variance.
Key takeaways:
- Only
5% of directors are under 50, indicating a potential gap in younger perspectives - Age-diverse boards correlated with higher-quality earnings reporting and better loan management in banks
- Multigenerational boards may facilitate smoother leadership transitions and expand the future leadership pool
For investors, this suggests that board age diversity could be a valuable metric when evaluating company governance and potential performance. However, it's important to balance this with other factors like director qualifications and sector-specific needs.
The study's findings have significant implications for market trends and investment strategies. The outperformance of companies with age-diverse boards, especially in innovation-driven sectors like technology and healthcare, could signal a shift in how investors evaluate corporate governance.
Key market implications:
- Potential for new ESG metrics focused on board age diversity
- Increased investor scrutiny of board composition, particularly in R&D-intensive industries
- Possible market advantage for companies proactively addressing age diversity in board refreshment
While no regulations currently address board age diversity, growing evidence of its benefits may lead to future governance changes. Investors should monitor this trend, as it could become a differentiating factor in stock performance, especially in sectors where innovation is critical.
Just
NORTHAMPTON, MA / ACCESSWIRE / October 22, 2024 / AllianceBernstein
Bob Herr | Director of Corporate Governance
Luke Pryor | Portfolio Manager-Security of the Future; Co-Portfolio Manager-Responsible US Equities; Senior Research Analyst-US Large Cap Value
A company's governance practices can provide valuable insights into its risk management and sustainability-and a company's board composition is a key factor to consider. Research-our own included-indicates that the age diversity of a company's board of directors may correlate with operational performance and shareholder returns, making a strong case for multigenerational boards.
Long on Experience, Short on Age Variability
There's a lot to be said for experience. Directors need the right mix of skills and experience to provide effective guidance and oversight. That often comes with time. But there's a point at which boards may become too monolithic, in our view.
Consider, for example, that nearly
Why does that matter? A broader range of generational perspectives on corporate boards may improve operating performance, strengthen business durability and smooth succession planning.
Those aren't just theories. They're backed up by research.
Age Diversity Linked to Improved Oversight and Financials
Researchers from the University of New Hampshire found that the presence of directors from Generation X (people born between 1965 and 1980) was correlated with improved financial performance, as measured by return on assets and price to book. Notably, the study found that that relationship was especially strong at firms that invest more in research and development (R&D) and engage in patenting activity.
Another recent study focused on more than 7,000 banks. Controlling for various firm and board characteristics, researchers found that greater age diversity on bank boards was correlated with higher-quality earnings reporting, reduced loan charge-offs and fewer nonperforming loans. The authors theorize that multigenerational boards are more likely to challenge entrenched managerial decisions and established protocol, resulting in improved monitoring effectiveness.
Eventually, of course, businesses need a succession plan for their leaders. Here, too, multigenerational boards appear to provide benefits. According to PwC, increased age diversity among corporate board members allows for more gradual leadership changes-reducing loss of experience and knowledge and smoothing inevitable leadership transitions. The study also suggested that multigenerational boards may help expand the pool of future leaders, while increasing teamwork and collaboration within an organization.
So, what does this mean for investors? Quite a bit, it turns out.
The Link Between Multigenerational Boards and Share Prices
We sorted constituents of the Russell 1000 Index into three baskets according to the age range of their directors. The first basket comprised boards with a greater than 30-year difference between the oldest and youngest directors. On the other end of the spectrum were boards with small age variability-20 years or less. A third basket made up the middle, with boards spanning 21 to 30 years in age difference.
After analyzing stock performance from 2017 through 2023, we found that companies with the greatest board age variance produced the strongest annualized returns, while those with the least age variance produced the weakest returns.
This trend was consistent across most sectors but was more pronounced in innovation-oriented sectors-even when controlling for founder-led versus non-founder-led organizations. Board age diversity appeared to be most valuable in R&D-intensive sectors like technology and healthcare, and least valuable in less R&D-intensive sectors like materials and real estate (Display).
Board Age Considerations Warrant a Closer Look
This isn't to say that youth trumps experience, nor are we suggesting that companies nominate inexperienced younger directors or entrenched older directors to maximize a board's age range. In our view, a director's qualifications are still of paramount importance. Nonetheless, multigenerational boards have tended to deliver stronger investment performance than their monogenerational counterparts over the past several years.
Despite a growing body of evidence highlighting the benefits of age diversity on corporate boards, we've yet to see any regulation or governance codes that address this issue. That could eventually change. Over time, we hope to better understand whether companies are including age diversity in their board refreshment considerations, and to identify sectors in which this may be most (and least) relevant.
There are many factors to consider when investing; the makeup of a company's board is just one. But given the correlation between board age diversity and improved operating metrics and returns, we believe age diversity on corporate boards warrants a closer look.
Landon Shea, Investment Stewardship Associate, and Michael Crovetto, Research Analyst, were instrumental in the research supporting this blog.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to change over time.
Learn more about AB's approach to responsibility here.
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SOURCE: AllianceBernstein
View the original press release on accesswire.com
FAQ
What percentage of board directors are under 50 years old according to AllianceBernstein's research?
How did companies with the greatest board age variance perform from 2017 to 2023?
In which sectors does board age diversity appear to be most valuable for AllianceBernstein (AB)?
What benefits did AllianceBernstein (AB) associate with multigenerational boards in banks?
