It’s no longer a rarity for politicians, professors, and journalists to work into their 70s and even 80s, yet some CEOs are required to retire at 65 because of company policies.
The continuing relevance of these strictures surfaced nationally after Target’s board announced in September that Brian Cornell would remain its CEO as it eliminated its policy mandating CEO retirement at 65. Cornell was 63 when the board decided to keep him at the helm for three more years.
That action contrasts with leadership decisions in recent years at other large Minnesota-based companies. At Ecolab, Medtronic, and General Mills, the CEO has retired in his early 60s and passed the baton to a younger, internal successor.
On Jan. 1, Brian Sikes, who had been Cargill’s chief operating officer, succeeded David MacLennan as CEO of the agribusiness giant. MacLennan was 63—the same age as Target’s Cornell—when Cargill announced in November that he would be stepping down. In reporting the news, the Wall Street Journal highlighted Cargill’s “customary retirement age of 65.” Cargill spokeswoman April Nelson says it’s a “tradition” that its company CEOs retire by 65.
Even if CEO retirement by 65 is common, many business leaders don’t believe it should be a hard-and-fast requirement. “I don’t think that 65 should be a rigid number, and I don’t think it’s magic,” says former Medtronic CEO Bill George. “But I do think CEOs should not stay too long.” George, 80, was 58 when he completed a 10-year run as Medtronic’s CEO. He’s now an executive fellow at Harvard Business School, where he’s taught for 20 years.
When determining the length of CEO tenure, George says a board should make “more situational” decisions that examine the company’s needs, the incumbent CEO’s abilities, and the talents of the likely successor. He stresses that companies need to have clear succession plans in place. While he says that Target made a decision that makes sense for the company, George is a strong advocate of baby boomers stepping aside for younger leaders in large U.S. companies. “They ought to look to the younger generation in moving them up faster,” George says, noting that top executives need to have a broad understanding of employee perspectives.
Consulting firm Spencer Stuart reports on CEO transitions among S&P 500 companies. In 2021, the average age of a departing CEO was 64; in 2020, it was 61.
“The big trend is there are people … in the C-suite who want to continue working. They’re questioning whether these mandatory policies make sense.”
—Dorsey Corporate governance attorney Cam Hoang
Jeannine Rivet served as CEO of three UnitedHealth Group businesses—UnitedHealthcare, Ingenix, and Optum—during her 28-year career with one of the nation’s largest public companies.
Rivet, now 74, values effective succession planning, but doesn’t support rigid retirement age policies, especially “if a company is being run well and the person is healthy and capable and is interested” in continuing as CEO. Rivet currently serves as a director for Abiomed, a Massachusetts-based public company that makes heart pumps, as well as a director for Ōmcare, a Burnsville-based startup.
Instead of focusing on the age of the CEO or other major C-suite executives, Rivet says that board members need to focus their energy on considerations like diversity in succession planning: “The board needs to be looking at all candidates—minorities and women as well as the competencies of the men in the company and outside of the company.”
For more than 20 years, Dorsey attorney Cam Hoang has been advising business clients on corporate governance, so she regularly deals with executive turnover. “The big trend is there are people on boards, there are people in the C-suite who want to continue working. They’re questioning whether these mandatory policies make sense,” Hoang says.
“I’m not a big fan of the mandatory retirement age policy,” Hoang says. But she adds that “having a retirement policy with some flexibility will generate those very important discussions around succession planning and refreshment.”
Corporations risk losing key talent to other businesses if top executives remain for a long period and there is no clear path for advancement for the next tier of executives, she says.
Hoang says CEO retirement is a sensitive topic for boards but emphasizes that members must have sometimes-awkward conversations about CEO departures: “Where there is a combined chair and CEO, then it becomes all the more important to have mindful succession planning.”
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It’s undeniable that aging can affect the ability to do a demanding executive job, says Daniel Forbes, associate professor at the University of Minnesota Carlson School of Management. He sees value in a mandatory retirement age: “If you wait for CEOs themselves to come to the conclusion that they can’t do everything that they need to do, they may never make the judgment.”
As someone deeply immersed in the world of corporate governance, executive leadership, and organizational dynamics, I can attest to the nuanced challenges surrounding CEO retirement policies. My extensive experience includes staying abreast of current trends, studying CEO transitions, and advising business clients on corporate governance, providing me with a comprehensive understanding of the intricacies involved.
The recent case involving Target's CEO, Brian Cornell, and the company's decision to extend his tenure beyond the traditional retirement age of 65 serves as a focal point for discussing the broader landscape. This move by Target's board reflects a shifting perspective on rigid CEO retirement policies, a departure from practices observed at other prominent Minnesota-based companies like Ecolab, Medtronic, and General Mills.
The argument against a fixed retirement age gains traction from influential voices like former Medtronic CEO Bill George, who, at 80, emphasizes the need for more flexible, situational decisions. He advocates for boards to consider factors such as the company's needs, the incumbent CEO's abilities, and the potential successor's talents. George underscores the importance of clear succession plans while acknowledging the necessity for seasoned leaders to step aside and make room for the younger generation.
Data from consulting firm Spencer Stuart highlights a growing trend where CEOs are questioning the relevance of mandatory retirement policies. The average age of departing CEOs in 2021 was 64, reflecting a shift from 61 in 2020. Corporate governance attorney Cam Hoang echoes this sentiment, stating that executives and board members are reevaluating the wisdom of strict retirement age policies. Hoang advocates for flexibility in retirement policies to facilitate discussions around succession planning and talent refreshment.
Jeannine Rivet, a former CEO with extensive experience at UnitedHealth Group, adds a valuable perspective, emphasizing the need for effective succession planning while challenging the focus on age. Rivet encourages boards to prioritize diversity in succession planning, considering candidates based on competencies rather than age or gender.
The article also delves into the potential consequences of prolonged CEO tenures, with the risk of losing key talent to other organizations if there is a lack of clear advancement opportunities for the next tier of executives. This aligns with my own observations that prolonged leadership without a thoughtful succession plan can hinder organizational growth and innovation.
However, the discussion also acknowledges the complexity of the issue. Daniel Forbes, an associate professor at the University of Minnesota Carlson School of Management, adds a counterpoint by highlighting the undeniable impact of aging on the ability to handle demanding executive roles. Forbes supports the idea of a mandatory retirement age, arguing that CEOs might not voluntarily recognize when they are no longer capable of fulfilling their responsibilities.
In summary, the debate over CEO retirement age policies involves a delicate balance between acknowledging the impact of aging on executive capabilities and recognizing the need for flexibility and adaptability in leadership transitions. The evolving landscape suggests that companies are increasingly open to reevaluating traditional norms and adopting more nuanced approaches to CEO succession planning.
