Old is gold, but new-age companies prefer younger CEOs

Where exactly do India’s biggest companies stand on this seemingly never-ending debate on the shades of grey? Well, the datasets indicate below-40 executives often run the show at new-age companies and startups, with large and complex firms relying instead largely on battle-hardened corporate veterans who have negotiated multiple business cycles.

ET Intelligence Group: Deloitte India’s move last month to send 35 senior partners above the age of 55 into golden sunset stoked a debate whether India Inc was waking up to ageism. But soon after, more column inches were also spent defending the ‘age is just a number’ view when a 40-plus fit and hungry Rohan Bopanna, chest-bumping with his doubles partner, lifted a grand slam title Down Under to demonstrate the ‘tenuous’ link between age and performance.

Where exactly do India’s biggest companies stand on this seemingly never-ending debate on the shades of grey? Well, the datasets indicate below-40 executives often run the show at new-age companies and startups, with large and complex firms relying instead largely on battle-hardened corporate veterans who have negotiated multiple business cycles.

In NSE-500 companies, a typical Indian CEO today is 57 years old. That age profile is roughly similar with data on C-suite occupancy for Fortune-500 firms, where the average age of the top executive is 57.7 years.

That’s only half the story, though. Data sourced from Prime Database also showed the number of CEOs under 40 is also.on a rise over the past five years. From 15 CEOs in 2020, the number of C-suite occupants aged 40 and below has risen to 25.

This apparent dichotomy is best explained by the layers of complexity demanded by the job-and the life-cycle and size of the employer. With an increasing share of startups and new-age companies in the $4-trillion economy, both sets of professionals will be in demand, say experts.

“To be fair, larger companies are more complex and need to deal with the risk of volatility. Therefore, the experience of the CEO begins to count as the stakes are very high,” said Ronesh Puri, managing director, Executive Access, a leading search firm. “In startups and new-age companies, there will be preference for younger CEOs because of the dynamic nature and demands of a new-age business,” he said.

Ability to Add Value

The average age of a typical CEO is also a function of longer tenures and the ability to stay relevant and valuable to a board or company promoter.

“This is bound to happen as the longevity and health of the people improve. They will be able to work longer and the average age of CEOs, generally, will steadily go up,” said corporate governance professional V. Ranganathan, who is an independent director on the boards of four companies. “Parallelly, there are new companies coming into the system and they are bound to have young people in their management teams. So, while the old economy companies will have more senior people, the new economy companies such as startups, fintech etc. will have younger CEOs.”

According to Ranganathan, there is a third category of regulated companies that may have to follow the mandatory age limits for the CEO. For instance, the Reserve Bank of India (RBI) has fixed the maximum age of the CEO of a private sector bank at 70 years. Similarly, in case of promoter-driven companies, the appointment of the CEO tends to be a family’s decision, with little or no intervention from independent directors.

Data on both the youngest and oldest CEOs of Indian companies showed that executives matching the extremities of the age profile occupy the C-suite predominantly at promoter-driven companies and start-ups. For instance, 36-year-old Karan Adani is the CEO of Adani Ports & SEZ. Similarly, 39-year- old Sahil Barua is the co-founder & CEO of the recently listed startup unicorn, Delhivery.

For a country with half its population aged below 25 years, the increase in the number of young CEOs is also a pointer to young talent climbing the corporate ladder.

“When it comes to CXOs, the younger lot is preferred, with the sweet spot being around 45 years of age. Also, if one looks at the mid and small sized companies, the average age of CEOs comes down to about 50-52 years,” Puri said.

Research studies globally have shown that the age of a CEO influences a company’s performance. A research paper published in the January 2019 issue of Strategic Management Journal based on owner-managed firms in three West European countries has shown that as a CEO ages, the firm experiences lower investment, lower sales growth and lower profitability but probability of survival increases. Older CEOs were found to emphasise survival at the expense of higher profits and faster growth.

Source: GWFM Research & Study