Stewardship Across Generations: A Stronger Model for Japan’s Boards

Japanese companies favor seniority, but there may be material benefits to multigenerational boards.

Japan has made major strides in corporate governance over the past decade. Reforms have included increasing board independence and modernizing committee structures. Yet one component of Japanese boards remains relatively unchanged: age. That’s a material oversight, in our view. Corporate boards that are too monolithic could be putting a damper on profits.

Corporate boards in Japan have long been characterized by seniority and continuity against a backdrop of lifetime employment. More than 95% of directors in the TOPIX 100 are in the bubble generation or older, while fewer than 1% are under the age of 50. This level of experience provides stability and institutional knowledge, but it may also entrench decision-making and hinder capital efficiency.

Many boards in Japan prioritize balance sheet safety over returning capital to shareholders and taking calculated risks. This has helped contribute to a more than 10% gap in return on equity (ROE) between Japanese and US equities . In a market long challenged by poor capital allocation, we think multigenerational boards can help buck this trend.

Multigenerational Boards Can Boost Performance

Studies in both the US and Europe present a clear link between multigenerational boards and financial performance. He, Miletkov and Staneva found that companies with younger directors not only generate higher return on assets but also command higher price-to-book values—particularly for firms that invest more in R&D and engage in patenting activity.

Younger boards can also mean less exposure to defaults—and chicanery. Janahi, Millo and Voulgaris discovered that banks with multigenerational boards experience fewer nonperforming loans, while Neukirchen, Posch and Betzer observed less corporate misconduct among firms with a greater age range.

These findings cumulatively suggest that multigenerational boards have the potential to improve capital allocation, reduce risk and boost valuations.

Mind the Gaps: Age and ROE

Our own in-house research confirms these findings. We tracked TOPIX constituents over a 10-year period—the largest study of its kind. The results were striking.

Firms with a more than 30-year age gap between the youngest and oldest director—what we define as multigenerational boards—delivered ROE more than 200 basis points higher, on average, than companies with smaller age gaps. This outperformance occurred in every calendar year during the period, and the results were statistically significant across sectors. Multigenerational boards achieved superior ROE in all but one sector, with the dispersion independent of size, style or founder-led status (Display).

Why the improved performance under multigenerational boards? We theorize that younger directors counterbalance the risk-averse tendencies of more senior directors. Prior academic research shows that younger boards exhibit greater risk tolerance, on average, than their senior counterparts. This is reflected in increased M&A activity and lower cash balances.

Of course, experience and qualifications remain critically important to board appointments. We favor a balanced approach that preserves legacy institutional knowledge while opening the door to next-generation dynamism.

What does this look like in practice?

Recruit’s Reinvention

Recruit Holdings began as a domestic media business, connecting employers and job seekers through advertising and information services. That model proved durable but faced structural limits as hiring shifted online.

A series of acquisitions—most notably Indeed (2012) and Glassdoor (2018)—repositioned Recruit at the center of a global, technology-enabled labor marketplace. These moves built on the company’s existing client relationships and sales infrastructure while adding global hiring platforms and data-driven job matching. 

As the business evolved, so did its leadership and governance. In 2019, 44-year-old Hisayuki “Deko” Idekoba joined Recruit’s board—an early step in broadening its generational mix. 

In 2021, Idekoba was appointed president and CEO—the youngest in the TOPIX 100 at the time. The company also separated the roles of CEO and chair, striking a balance in which strong executive leadership drives the business forward, while the board exercises appropriate oversight. 

Board composition broadened further to include directors with experience in digital platforms, global operations and HR technology, alongside more internationally diverse and younger members.

This shift coincided with a step change in financial performance. Over the past decade, operating earnings have expanded meaningfully, with HR Technology as the primary profit driver. Revenue and earnings are now driven by scalable, technology-enabled hiring platforms rather than domestic advertising cycles, supporting stronger operating leverage and global reach. Indeed and Glassdoor anchor a global platform connecting millions of users, while overall profits have roughly tripled since Idekoba’s appointment, reaching nearly ¥500 billion in FY2025 (Display).

Recruit’s evolution shows how generational diversity can support reinvention. By pairing institutional knowledge with leaders rooted in its next growth engine, the company aligned governance with strategy—and, in our view, improved its capacity to create long-term value.

As we see it, when properly implemented, multigenerational boards can unlock organizational agility, greater independence and new pathways for value creation. In an era of rapid market and technological change, we believe boards that balance experience with fresh perspectives can be catalysts for building shareholder value.

The authors would like to thank Landon Shea, Investment Stewardship Associate and Research Lead, for his contribution to this piece.