Financial Times

Geriatric company directorates
A cursory glance through the pages of some of our company annual reports would reveal that many of the directors are over the stipulated age limit to retain their boardroom positions. The practice of aging directors hanging on to their positions in many a corporate boardroom is widespread in Sri Lanka. An exercise in boardroom gerontology would no doubt be very revealing and it would be interesting to see how many of our directors are over the stipulated age limit.

It is not uncommon to see many companies having special resolutions nominating over-aged directors for re-election. Some of them should have retired long ago.

They usually succeed in betting re-elected given the incestuous nature of Colombo's corporate world and the cosy relationships and informal connections that exist in our boardrooms.

There could also be cultural reasons for the aging nature of our boardrooms given the traditional respect and regard our society bestows on the elderly. Of course, it could be argued that the experience and knowledge of these gentlemen is certainly useful for the organisations they represent.

Furthermore, in an age where corporate crime is rampant and some of the icons of capitalism have been found to be crooks whose greed brought about the downfall of their corporations, it could also be argued that the moral authority and reputation of senior directors are an asset, hence the need to retain their services well past the usual retirement age.

But what this means is that in effect it is blocking the prospects for advancement of those younger executives further down the line. In fact this is a complaint among many young company executives who have risen up the corporate ladder relatively fast but find their opportunities for further advancement blocked or that the conservative attitudes of aging directors are not allowing them to implement changes that they believe would allow their companies to grow faster.

The business world is changing so fast that younger people would be in a better position to cope with and adapt to such rapid changes. The question is whether elderly directors can play the role they are supposed to play or are merely used by certain businessmen to adorn their boardrooms and annual reports for cosmetic purposes to project a certain image to shareholders and the investing public.

The contribution that some of these gentlemen could make in the contemporary corporate world is doubtful as their experience and knowledge would relate to a different time and culture.

There are doubts whether some of them are open to new ideas, or have the energy required to do their jobs in today's fast-paced business environment. Another issue is that of the many inter-locking directorates that exist in our corporate world. One wonders how such directors could perform their duties effectively and free of any conflict of interest when they are on the boards of so many companies. There have been comments made in public in the past about how old boy networks in Colombo's cosy corporate world could serve to cover up fraud.

All this leads to the question whether such practices are fair by shareholders and the investing public. Of course, the companies could argue that shareholders themselves elect the directors. But this is not entirely accurate as many small shareholders do not bother to attend AGMs. Many also lack the knowledge and confidence to take independent decisions. Even if they do they would not have the clout or perhaps might not dare to challenge powerful figures in the corporate world.

One reason for our slow economic and corporate growth could be that we are stifling the enthusiasm of capable young executives. What is required is more young blood in our corporate boardrooms.

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