Biden and Trump may now not have the option to steer many top firms as a result of their age – and for good reason.

President Joe Biden, who’s currently in search of a second term because the Democratic Party candidate, is 81 years old. Former President Donald Trump, the Republican Party candidate, is 78 years old. No one older than him has ever run for the office of US President before. That was also in 2020when the identical two men competed against one another.

The age of the candidates, coupled with obvious signs of cognitive and physical declinehave many politicians and other Americans are asking questions and expressed doubts concerning the stamina and skill of each men to steer the nation. These concerns are justified by research I and a finance professor colleague, Adam Yorewhich was conducted on older CEOs.

One of our observations was that about half of 1,500 largest publicly traded firms within the USA force their CEOs to resign after they reach around 65 years of age.

Make pension compulsory

Two distinguished examples are the famous CEO of General Electric Jack Welch, who needed to retire on the age of 65and former Vice President Al Gore, who resigned from Apple's board of directors in January 2024, after serving on the board for 20 years. Gore had turned 75 together with one other board member, and the made her ineligible for a brand new term.

This corporate practice raises a logical query: If Gore is taken into account too old to take a seat on Apple's board of directors, are politicians his age also too old to control one of the crucial powerful countries on the planet?

For firms within the S&P 500 Indexwhich is usually considered the perfect indicator of the performance of the US stock market, mandatory pension schemes are much more widespread. Almost 70% of those 500 firms are retiring their board members at a certain age.

We found that the everyday retirement age for CEO is 65 and that board members of firms with a compulsory retirement age must generally retire of their mid-70s.

If this standard were applied to US politics, neither Trump nor Biden could have run for president in 2020, let alone in 2024.

Previously and I, in a Study we published in 2016 within the Journal of Empirical Finance, found compelling evidence for using mandatory retirement policies for top executives.

After controlling for CEO tenure, the information showed that an organization loses 0.34% of its value for each yr a CEO gets older. We also found that this effect is most pronounced for CEOs over the age of 68.

When the sample was divided into CEOs under 42 and CEOs over 68, essentially the youngest and oldest of those company leaders, it was found that the shares of firms with younger CEOs achieved a 1.55 percent higher performance per yr than the shares of firms with older CEOs.

The data we examined also showed that this negative relationship between a CEO's age and the performance of his or her company's stock disappears for firms with mandatory pension schemes. We subsequently concluded that mandatory pension schemes are effective in limiting the negative impact of older CEOs on performance.

Anticipate negative consequences

To be clear, our goal was to not prove the reality.

Our suspicion was that mandatory age limits were primarily designed to oust established executives who had amassed an excessive amount of power for the advantage of their shareholders. But after combing through some 12,600 data points, we found no evidence to support our original hypothesis.

In other words, our results contradicted our expectations. Instead, we learned that firms that Older CEOs are far less actively involved in deal-making.

That is, they’re less likely to interact in mergers and acquisitions, latest partnerships and joint ventures than younger CEOs. They are also less more likely to hire or fire employees. This is true no matter how long the CEO over 65 has been in office.

Documenting cognitive changes

Our findings are consistent with scientific knowledge about aging.

Many researchers have found that cognitive decline may be very common with age. Age-related physiological changes appear to affect Decision-making and impair judgment-related performance Researchers have long found that inductive reasoning, perceptual speed, numerical ability and verbal memory are all Long-term decline with agealthough a few of these problems might be reversed. And these qualities are essential for each business and government leadership.

Of course, there are significant differences between running a rustic and running a business. And in fact, the experience that comes with age brings benefits. However, a lot of the abilities and characteristics needed to successfully do each jobs are similar.

Many of the country's most successful firms prefer leaders under 65 because younger leaders are inclined to perform higher than their older counterparts. A decade after conducting this research, I ponder if this preference should hold true when Americans select the one who will lead the United States.