The age of the activist investor: Is there too much grey hair in the boardroom?

The second of a two-part series on how the rise of activist shareholders could pressure Oregon public companies to reconsider who sits on their boards.

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Gertrude Boyle became chair of Columbia Sportswear when Richard Nixon was president, the Beatles disbanded and the world’s first jumbo-jet, the Boeing 747, made its inaugural commercial flight.

Forty-eight years later, Boyle, 93, remains the chair of the board of directors of the iconic outdoor apparel retailer. She is the oldest board chair of an Oregon public company.

It is an extraordinary feat to head up a board of directors of a public company for almost five decades. But Boyle’s tenure and advanced age for a director are likely to become relics of the past at public companies.  

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Activist investors are pushing more than ever before for changes to corporate boards. In this era of heightened scrutiny of board performance, shareholders and even regulators may be less tolerant of directors that have sat on boards for decades, as many still do, or are at an advanced age which some would deem too old for the rigors of holding a board member position.

“Being a board member is no longer a lifetime exercise. Investors want to see more turnover,” said Jeffrey Bird, a lawyer with Lane Powell. “It is forcing boards to reevaluate boards in terms of age and tenure.”

Part of the push for board turnover and preference for younger directors is the rapid change in technology. Older directors who have been on a board for many years may not be as up-to-date with technological changes as the younger set. Corporate boards are also still dominated by older, white men. Having a more diverse board with women and minorities is part of today’s corporate governance best practices.  

“Investors want people with expertise and know-how. They are actively trying to get younger people and minorities,” said Bird.

It should be noted that the role of a board director is increasingly complex, and seasoned directors may be more suited to the demands of the job. Public companies should certainly guard against ageism.

It has been 16 years since the passage of the Sarbanes Oxley Act, which increased the accountability of directors to oversee management decisions, financial reporting and auditing. Directors have more far more time-consuming responsibilities than they used to. Gone are the days when someone had the time to sit on several boards.

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“You are committed to be there 24/7 for the company. Your time commitment to that company may go up quickly,” said Peter Gleason, president and CEO of the National Association of Corporate Directors. “It used to be that you could sit on five or six boards if you were retired. Now you can sit on one or two.”

The boards of Oregon public companies have their fair share of older members and also directors who have been in the role for decades. (See list below.) But there has also been a recent changing of the guard in the boardroom at several pubic companies. Some businesses have hired new directors in the past few years, indicating that some may be feeling the pressure to freshen up their corporate governance.

The oldest corporate board members at Oregon companies are around the 75 years mark. (Columbia Sportswear’s Gertrude Boyle is an exception). The following ages of directors have been sourced from 2017 SEC proxy filings.

FLIR Systems, the maker of infrared cameras, has two directors in the 70 plus range – William Crouch, 75, a director since 2005; Earl Lewis, 73, who has been on the board since 1999 and was CEO for three years.   Another long-time member is Steven Wynne, 65, who also joined the board in 1999.

William Furman, the CEO and chair of the Greenbrier Companies, has been board director at the railroad company for 17 years. The firm hired two new directors in 2017: Wanda Felton, 59, a senior adviser for Centri Capital; and David Starling, 67, former CEO of Kansas City Southern, a railroad company.

Schnitzer Steel Industries’s board leans toward the older generation, with three members in their 70s. But it also recently hired two new board directors in 2017: Rhonda Hunter, 55, a senior vice president at Timberlands; and Michael Sutherlin, 71, CEO of Joy Global, a mining equipment manufacturer.

Digimarc’s all male board includes CEO and chair William Miller, 71, who has been a director for 10 years. The tech company also went through board turnover recently, having hired three youngish directors in 2015 and 2016: Gary DeStanfano, 60, a Nike manager; Andrew Walter, 48, a Proctor & Gamble executive; and Richard King, 67, former chief operating officer at Albertsons

Lattice Semiconductor, the tech company, which was recently in talks with activist shareholders about the composition of its board, has several recently hired directors who joined in the past five years. These include Brian Beattie, 63, former executive at Synopsis and board member since 2016;  Jeffrey Richardson, 52, former executive of LSI Corp., who joined board in 2014; and Frederick Weber, 53, a business consultant, who became a director in 2015.   

Old timers and long-term board members:

Source: 2017 SEC company proxy filings

Marcus Williams, a partner with Davis Wright Tremaine law firm, said he is a fan of term and age limits for directors, though he cautioned that these should be assessed on a company by company basis. “Establishing an age standard is helpful to shareholders. It avoids a situation where you have to make a judgement on mental faculties,” said Williams.

He added having seasoned directors is helpful to providing balance, especially at companies with a young executive team. “Companies will grow faster with younger, dynamic management. But you also need grey hair in your boardroom. Youthful aggression is what gets companies off the ground. But you need a range because each director has something meaningful to contribute.”

Many public companies seek former or retired CEOs to become directors because of their perceived sector expertise. But this makes it hard for companies to recruit young people and has also led to a dearth of female directors, said Ryan Krause, associate professor at the MJ Neeley School of Business, Texas Christian University.

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Gleason recommends boards cast a wider net when looking to hire new members. “We get asked every day if we can find a director,” said Gleason, whose association advises members on boardroom strategy. “You can find them, but don’t be so specific that you want a CEO.”

Imposing one-size-fits all rules on age and term limits for directors can hinder searches. But the push from activist investors and regulators to regularly update the composition of boards is often warranted. “There needs to a more conscious effort to reevaluate the role that boards have,” said Krause. 

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