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.