How old should the CEO of a large company be? According to a recent survey by a business magazine, the average CEO age in India is 51 years. He has had about 25 years of experience, with 14 years in the same company.

The recent appointment of Cyrus Mistry as the heir apparent to Ratan Tata breaks the mould in many ways. First, Mistry is only 43. This automatically limits his experience. Second, in terms of years with the same company, one view is that you should count it as zero. True, Mistry has been on the Tata Sons board for a few years, but that’s not the same thing as having an executive role. In India, a non-executive director can get away with not knowing the others on the same board.

Mistry starts with one advantage; his family owns 18.4 per cent of Tata Sons, which is the holding company for the group. The rest of the shares are owned by charitable trusts. Tradition is that they will continue to be under Tata even when Mistry takes over. From this perspective, the change of guard is essentially a transfer from one family member to another and should not be confused with succession in professional organisations.

The average age of CEOs is skewed by the preponderance of family-managed organisations in the big league. You don’t expect the founder-entrepreneur to retire until he is ready to give up his ghost. There are companies in which the CEO (or the person calling the shots, whatever his designation) is past 90. But family-run businesses provide a bias at the other end too. When the original entrepreneur dies, it is very often his son who takes over. And there is obviously a 20-30 year age gap between the two.

The so-called professionally-managed companies in India have adopted many of the characteristics of the family-run concerns and disregard for succession planning is one of them. The CEO sees himself as immortal and actively works to neutralise any threat from his subordinates. In the endgame, the company suffers. Look at what is happening in a large engineering giant, though the blame for a poor order book is being put on the economic slowdown and the threat from Chinese imports.

The only companies in which the age of the CEO is not influenced by these factors are the MNCs and the public sector undertakings (PSUs). In PSUs, it is rarely that you see the CEO’s chair until your pension is practically in your pocket. And the MNCs are chopping and changing their succession models as India becomes more mainstream. The country is no longer a hardship posting — in fact, the most dynamic are particularly keen to serve in the world’s most dynamic market. Here, the CEO is becoming younger and will be more so in the future.

There is another factor at play. The dotcoms are coming. They didn’t make much headway the last time. But now several seem set for listing on the stock exchanges. Most of the CEOs are young — very young. Many of them are still in the twenties and thirties. When they start entering the ranks of the top 500 Indian companies, there will be a sharp fall in CEO age.

On the other side, however, many companies have begun realising that 58 or 60 is too early to pension off a fully-functional chief executive. The retirement age is being increased and this adds to the average.

The corner office today is really in a state of flux. For every factor increasing CEO age, there is one lowering it. Eventually, there will be a realisation that CEO age doesn’t really matter. What is important is effectiveness. But more vital than that is CEO tenure. Even the best of CEOs must retire to give others a chance. CEO tenure must be reduced as much as possible.

Isn’t there a contradiction in that statement and what went before? Not really. The best of CEOs should bow out and take up new assignments. Entrepreneurship is not only for the young. Silver citizens in encore careers could easily outshine them.

BECOMING YOUNGER

CEO age in large Indian companies

Year 2001; 2007

Banking and financial services
49-52; 42-45

Manufacturing
56-62; 48-53

FMCG and consumer services
49-52; 43-47

Technology
40-42; 36-40

Source: Survey by EMA Partners