Due to their age, Trump and Biden could now not lead many top corporations – and for good reason

Former President Donald Trump, the candidate of the Republican Party, is 78 years old. No older candidate has ever run because the official candidate of his party for the office of US President. That was also in 2020when Trump lost to President Joe Biden.

Biden was 81 when he withdrew his re-election bid on July 21, 2024. His age, coupled with obvious signs of cognitive and physical declineplayed a key role in efforts to get him to resign. Many politicians, Journalists And other Americans are also raising questions and expressing doubts about Trump’s endurance and skill to guide 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 corporations within the USA. force their CEOs to resign after they reach across the age of 65.

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 twenty 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 too old to control one of the vital powerful countries on this planet?

For corporations 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 corporations 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 corporations 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 info 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 corporations with younger CEOs achieved a 1.55 percent higher performance per yr than the shares of corporations 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 corporations 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 good thing about 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 corporations that Older CEOs are far less actively involved in deal-making.

That is, they’re less likely to have interaction in mergers and acquisitions, recent partnerships and joint ventures than younger CEOs. They are also less prone 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 obligatory for each business and government leadership.

Of course, there are significant differences between running a rustic and running a business. And after all, 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 corporations prefer leaders under 65 because younger leaders are likely to perform higher than their older counterparts. A decade after conducting this research, I’m wondering if this preference should hold true when Americans select the one who will lead the United States.