Does Age Diversity in the Boards of Directors Matter for Firm Performance? The Evidence from the Disruptive Trends in Automobile Manufacturing Industry

In conditions of technological industry transformation, the role of the Board of directors’ members becomes extremely important, as these individuals are delegated authority to solve complex tasks such as planning and executing the business strategy for the company to retain the competitive edge over the other firms. Various recent studies show that typical boards of directors have high average age with majority of directors of pre-retirement age (60-63 years). With retirement of current board members, the shareholders should decide whether to nominate individuals with executive background who often are in pre-retirement age or the younger ones who have different experience. This fact pushes us to state the question whether the board of directors should include younger members, diversifying board structure and how it will influence company performance. These are the key questions investigated in this study. This study looked at the sample data of companies from automotive industry over the period of 2010 to 2017, from Bloomberg database. We estimated fixed/random effect models according to the nature of our data. Studying age characteristics of the board structures from automobile manufacturing industry we found evidence for low age diversity, as most representatives were from Baby Boomers generation (people born between 1946-1964), with average age of 58. Using the ranking of leading companies in development of autonomous driving technology, we explored several groups of companies categorized by age diversity and technology score. Analysis demonstrated that following companies are both age diversified and drive the autonomous driving technology: Daimler, Ford, Volkswagen, and Renault. Finally, we found evidence that younger board members add value to the firm performance. Young board members contribute with new knowledge, creativity and innovative capacity, which become crucial in modern transformation of automotive industry.