CHAPTER FIVE
On Mandatory Executive Retirement
THE MOST INTELLIGENT PROVISION—and the most needed one—in the recent (i.e., 1978) law extending the mandatory retirement age for private-sector employees to seventy (and eliminating it altogether for government employees) is the provision which permits the mandatory retirement of senior executives at age sixty-five.
Unless the seniors vacate top-executive slots, the juniors cannot move up. And in the next ten years, as the babies of the “baby boom” reach middle age, there will be a press of young and ambitious executives between thirty and forty hungry for promotion and well qualified for it. Also, the one affliction of which the sufferer himself is totally unaware is senility; and senility in high places is one of the most dangerous degenerative diseases of an organization.
Yet as the law is written and commonly interpreted, it will not be enforceable and will not be enforced—nor is it desirable that it be. What is both enforceable and desirable is a policy—and it is well within the law as it stands—under which senior executives are forced to step down at age sixty-five but may continue until the new normal retirement age of seventy in a nonexecutive capacity. That’s now the law in our largest state, California, under a retirement bill passed in 1977.
But in the rest of the country we will soon find that to retire senior executives at sixty-five when all the others can stay on until seventy simply won’t work. How many people in the labor force will want to stay on and keep working full-time past age sixty-five we do not know as yet. But we do know that the desire to retire diminishes sharply the higher up a man climbs on the occupational and career ladders.
Coal miners are perfectly happy, as a rule, to retire well before sixty-five after a lifetime underground. Senior executives, almost without exception, dread retirement, as do doctors and lawyers. They have started later. Physically the work is not nearly as demanding as most blue-collar jobs. These men may talk of the joys of hunting and fishing, of golf, and of reading all the books they missed. But as a rule, they can barely stand a six-week vacation away from their work. For their work—unlike that of the coal miner’s—interests them, indeed tends to absorb them.
And so compulsory retirement of senior executives at age sixty-five, while welcomed by everybody else, will be sabotaged by the senior executives themselves—if retirement means being driven out to pasture. If we insist on retirement at sixty-five when the other people are allowed, if not encouraged, to stay on, we will increasingly find that the ablest and most accomplished men of age fifty-five will refuse promotion to senior executive jobs requiring retirement at age sixty-five. We will then increasingly look to second-raters for the top jobs.
The senior executive at age sixty-five who is physically and mentally in good shape, as the majority are these days, is too valuable a resource to discard. The present retirement age of sixty-five was set in the mid-twenties in this country; biologically, a man of that age today is equivalent to a man of fifty-three back then. He’s just at his peak.
Nonetheless, population pressures may make it necessary to free the job position he holds. The only sensible policy is one that provides for the senior man to leave the executive suite at age sixty-five but then continue working as an individual professional, provided, of course, that he wants to.
This may sound like a radical innovation. “Stepping down” is something people always think cannot be done—and “stepping down” in this case clearly entails getting less money and having much less power. But it is already standard practice in some companies and has caused no problems wherever introduced. At Westinghouse Electric, for instance, officers give up executive duties and titles at age sixty and become “counselors.”
The retiring executive’s pension would be based on his five years of highest pay during the last ten or twelve years, rather than on the last five years of full-time employment, in order to avoid a financial penalty for longer service.
The main thing to do is to work out with the executive the role which he should assume when he steps out of the vice presidency or presidency. This requires advance preparation, beginning, experience indicates, at least six months, but rarely more than one year, before the actual date. (Don’t start too soon. People aren’t ready to think about their “stepping down” until they have to.)
The man’s future role requires careful thought on what might be called “career continuation” or “career extension.” What is the individual really good at? What is he really interested in? But also: What are the most important needs of the company?
The vice president of marketing, for instance, may be the right man to take over a major product-development assignment or to work out, develop, test, and put in place a new policy for product introductions. Or he may be the best man to shepherd a clutch of small entrepreneurial businesses the large company has financed in partnership with individual owner-entrepreneurs. The sixty-five-year-old treasurer of the company’s international division may be the ideal man to train the company’s financial people through-out the world on foreign-exchange management and inflation accounting.
Some of these assignments may be full-time and last for years. Others start out full-time and taper off gradually. Others are part-time from the start. But all of them use the skills, experience, and status of a senior man where he can make a major contribution. Yet they move him out of executive and managerial responsibility, with its burdens, its time constraints, and its pressures.
The executive who wants a “second career”—and an increasing number of men in business do—had better start earlier. A man’s mid-forties are the best time to think through what he wants out of life and to change careers. The pension is then usually vested and the kids are grown up; and by then people know what they are good at, what they can do, and what they like to do. Becoming a professional director—working full-time as a part-time member of four or five boards—would be one possibility. Seasoned directors are increasingly in demand.
But the majority of senior executives will want to stay in executive work as long as they can, that is until age sixty-five. And unless a person has changed careers earlier and knows how to do it, he is somewhat old for a second career at age sixty-five. But he is the right age for career continuation or career extension.
It shouldn’t be difficult to work out what an executive could take on at age sixty-five. But often it will require an outsider, not necessarily a psychologist or personnel specialist, but someone who isn’t part of the problem and can talk freely and in confidence with both the executive and the company. It will require someone who can tell the executive frankly that he will cease to be an executive; he will once again be one of the “working stiffs,” unable to “whistle up” the company plane on demand or sit on the management committee or even the board of directors. His alternative, it should be made clear, is retirement.
All this may sound like “big-company stuff.” And indeed so far only big companies, to the best of my knowledge, have concerned themselves with career extension of the executive at sixty-five. But the new retirement law that permits retirement at age sixty-five from the executive position for the senior man should make career extension even more of a concern for the small- and middle-sized business. There the need to attract and hold able young people is usually acute; and the need to free senior positions is thus particularly great. But there also the competence, the knowledge, the skills, and the dedication which the senior executive of sixty-five represents are often far more needed and far more difficult to replace than in the big business.
To withdraw from the burden of managing at the top at age sixty-five is sensible for individual and company alike—but only if we use it as an opportunity to put to work the individual’s strengths and his proven performance capabilities, for his own sake but also for that of the business, of the society, and of the economy.
(1978)