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European board diversity slowly increases as pay gap on boards begins to narrow

According to Korn Ferry’s latest Non-Executive Directors in Europe report, there is a slow march toward more diverse board representation and less pay disparity between male and female board members in the region.

The study finds that overall, the proportion of female directors increased year on year (34% in 2019, up from 32% in 2018 and 30% in 2017).

Across Europe, male non-executive directors receive 5% (median) more in total fees than their female counterparts, which is an improvement of 1% from the prior year. The 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.

As in last year’s report, just 8% of all non-executive board chairs are women. However, the number of women holding deputy chair/senior independent director positions increased to 20% (up from 18%). The number of women in remuneration chair roles increased to 31% (up from 25%) and chair of the audit increased to 29% (up from 24%).

Across Europe the number of committees without any female directors also dropped, with 19% of audit committees (down from 24%) and 25% of remuneration committees (down from 29%).

“Different countries have adopted different approaches to boost female presence in the boardroom. Some have set internal targets while others, unsatisfied with slow progress, have resorted to binding obligations using strict quotas to prioritise female hiring,” said Sonamara Jeffreys, co-president of Korn Ferry EMEA. “Both approaches have had success in different countries, suggesting there’s no one way to handle this problem – it’s about identifying the stumbling blocks in each situation and being flexible in how to address them.”

Director remuneration and fee policy varies widely across Europe. Board fees are typically compensated with fixed fees. According to the report, the median basic policy fee paid to directors across Europe is €70,000, with significant fee variations across the region, often based on time and responsibility commitment as well as local practice. Universally, directors who are on a board committee, such as an audit committee or remuneration committee, receive an additional fee.

The study also found that pay structures have continued to develop, although not in a uniform way. Some countries, like Germany, continue to see a share of companies use variable compensation for non-executive directors, which stands in sharp contrast to practices in countries like the United Kingdom.

Fees delivered in shares are popular in countries like Switzerland and Finland but are almost unheard of in other countries like Italy and the Netherlands. Across the continent it is rare to see requirements for non-executive directors to build a significant shareholding in the company they oversee.

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