Diversity of non-executive directors differs widely across Europe

25 March 2019 Consultancy.eu

The diversity of non-executive directors has improved marginally over the past year, according to a new study. Diversity performance of boardrooms however differs widely across European countries. 

The study, conducted by Korn Ferry, looked at the composition and breakdown of the board of directors of 384 listed companies in twelve European countries. The researchers focused their assessment of non-executive directors – an independent or external director that is a member of the board of directors, but not a member of the executive management team. Fundamentally, the non-executive director role is to provide a creative contribution and improvement to the board by providing dispassionate and objective criticism.

An analysis of gender diversity found that slight improvements have been made in recent years. Across the country sample, 32% of directors currently are female, slightly up from 30% in 2017 and 29% in 2016. Often rooted in country-specific cultural, economic and relational factors, there are large differences visible between the countries. France leads the way in gender diversity with the highest proportion of female directors on boards (45%, up from 40% last year). The country’s high score leans on binding legislation that came into effect enforcing quotas to prioritise female hiring. Two Nordic countries follow – Sweden and Norway – on the back of Scandinavia’s female-friendly work culture. 

Italy ranks fourth – the country saw the proportion of female directors increase in recent years to 37% without the use of quotas. Austria, Spain and Switzerland are the bottom performers in the analysis, with the Netherlands and Germany also ranking below the European average of 32% female representation.

Average gender mix

Just like last year, 8% of non-executive chairs are women. Women assuming the position of deputy chair/senior independent director further increased to 18%, and the numbers for remuneration chair increased to 29 % from 25% last year. The number of women holding the position of chair of the audit also increased by 3% to 24%. The only exception concerns risk committees with a slight decrease to 23% from 25% last year. 

Gender pay gap

Looking at the number of non-executive women in the board of directors is however just one angle of exploring gender diversity. Another relevant factor is looking at remuneration, with the data disclosing that male non-executive directors in Europe receive, at the median, 6% more in total fees than their female counterparts. In Spain and Norway, such a gap does not exist. In the Netherlands, the gender pay gap is 4% in favour of men. In contrast, in Germany male directors rack up a staggering 21% more than female executives. 

“The pay gap appears to result mainly from an underrepresentation of women on the strategically important board committees, which has translated into women board members being paid less than men”, state the report researchers. 

Nationality mix

The background of director and non-executive director roles is a much debated topic. According to experts, having people from different nationalities and backgrounds in leadership positions is beneficial to company performance, teamwork and culture. Bringing in different views, management styles and cultural heritage into decision-making has been found to enhance the execution of strategic plans. 

A 2018 study by Boston Consulting Group (BCG) linked management team diversity to improved financial performance, once more, building on a series of reports aimed at demystifying the matter. This analysis found that companies with an above-average diversity score in leadership teams can enjoy an up to 20% higher rate of revenue growth. Meanwhile, a Korn Ferry study from 2017 showed that gender diversity across all levels of employees can have a considerable impact on both male and female engagement and enablement at work.

Average nationality mix

Listed companies in Switzerland, Belgium and the UK have the most diverse backgrounds in non-executive positions. In Switzerland, around 25% of executives originally come from outside of Europe, with 30% of the Europeans coming from a different country than where the company is headquartered. Not surprisingly, Germany and France (both above 70%) are inclined to have the most country national on their boards, a situation mostly explained by local management heritage and local language preferences.

Across the board, the European median average board age – also a factor of diversity – is 60 years. The youngest median average director age was 58 in Italy and Norway, while the oldest median average age was 64 in the Netherlands. 

Related: Diversity and MeToo lift women in leadership positions to record level.

Europe tops working environment for women, Nordics lead

08 April 2019 Consultancy.eu

Nordic countries continue to be the most supportive of working women, with Iceland and Sweden the two countries providing the best environment for women and female leaders. A wage gap between men and women remains – and reducing this gender pay gap to the level of best practice countries could add $2 trillion to the GDPs of OECD countries.

The conditions and opportunities open to women in the workplace and wider society differs considerably across the globe. Recent decades have seen increased focus on ending millennia of discriminatory practices that have held back women from equal opportunities in the workplace. Barriers remain however, with women continuing to face a host of implicit and in some instance explicit conditions on opportunities according to a new study by PwC.

The Big Four firm’s ‘Women in Work Index 2019’ report explores trends around the economic empowerment of women across the globe, finding that Iceland remains the top country globally for working women. The Nordic country boasts strong performance across all measured metrics, boosting its score in female unemployment and participation rates on last year’s results. Sweden is in number two, offering a closer pay gap to that of Iceland but falling behind on female unemployment rates.

Female labour force participation rate, 2000 - 2017

New Zealand moves up a spot to number three, offering a lower pay gap than the top two spots, but a lower performance in participation rates. Slovenia and Norway round out the top five, the former improving one spot while the latter fell in its ranking by two places. Nordic countries remain well represented in the top ten, with Denmark in at number seven and Finland at number nine.

Of the 33 countries assessed in the report, Korea came in last place – falling one spot. Mexico climbed a spot, reflecting a shift in the country’s pay gap by 5%. Greece, Chile and Italy took the three next lowest spots respectively.

A number of countries have managed to boost their ranking significantly on the results from 2000, while some saw significant declines. The US, interestingly, has bucked the trend, falling from 9th place in 2000 to 23rd in the latest edition. Key European countries too have seen sharp declines, particularly Austria, down from 13th to 25th spot, Portugal, falling from 5th to 15th spot, and France, from 12th to 22nd spot.

Luxembourg saw the most significant improvement, up from 23rd in 2000 to 6th in the most recent survey, while Poland has moved up from 19th to 8th place. Belgium has increased ten spots in the intervening 18 years, while Ireland and the UK increased by eight and five spots respectively.

Gender wage gap, 2000 - 2017

Much to be gained

The net benefit to the global and regional economies of improving female participation rates to that of Sweden could be significant. For OECD countries, an additional $6 trillion in GDP could be generated, while a closing of the gender pay gap could see females' take-home pay across the countries surveyed increase by $2 trillion. The most significant amount could be won in Korea, followed by Estonia and Japan.

For the two most populace countries, considerably more could be gained from bridging the gap between men and women in employment and other economic activities. China has a high proportion of women in work, however, a significant gender pay gap exists – if the gap would be closed the country would see $2 trillion in additional pay flow to women. Meanwhile increasing female employment levels to that of Sweden would add around $500 billion to the country’s economy. On a positive note, the research notes that China has been highly successful in supporting female entrepreneurship.

India could also see significant additions to GDP were women to take part more in the economy, as Indian women perform considerable amounts of unpaid labour. Overall participation rates remain low in India – with a closing of the gap likely to generate around $7 trillion in additional GDP.