Lessons From European and Australian Diversity Models

The United States has traditionally held a leadership position in the global community when it comes to diversity, but Europe has bridged the gap. Large European companies now have roughly the same percentage of women on their boards as in the United States, and their growth has been fast.

A recent biennial study from international consulting firm Egon Zehnder, which surveyed 350 companies making more than 4 billion euros in 17 countries, shows women now hold a little more than 20 percent of board positions in Europe compared with 21.2 percent in the U.S.

“That is up from 15.6 percent just two years ago and a jump from 8 percent in 2004,” said Egon Zehnder consultant Charles Gray. For the first time since the study began, all the companies studied in the U.K., Austria and Ireland had at least one woman on their board.

It’s not all good news, however. While board diversity has been growing in the U.S and faster in Europe, the study also highlights that representation of women is lagging in chair and executive director roles — positions with real decision-making power.

Women in Europe make up 5.6 percent of directors with executive power and the number is disappointing in the U.S. as well. Only 1 in 12 executive directors in American companies are women.

Part of that may have to do with low turnover in these positions, Gray said. “You may have several director seats that open up at one time so it’s easier to make adjustments to board composition, whereas sometimes with executive roles, depending on the life cycle of those positions, they may not come up as frequently,” he said.

What can companies in the U.S. do to increase these numbers? Gray said he believes the women currently in board positions are promising candidates for pushing more change forward to the executive level.

“What you’ll find at the board level is that when you have more diversity, those directors are going to start asking questions and probably will want to make sure that their companies are making progress on the executive level as well,” he said.

Rohini Anand, Sodexo’s senior vice president and chief diversity officer, believes a top-down approach is more promising, like what many European countries have done.  

“The U.S. government and current leadership in companies can learn a few things from global neighbors who are leading the way in diversity initiatives by applying their approach to get more women in the door for executive and director positions,” Anand said.

Anand cited Sodexo’s 2014 Global Employee Engagement study — to be released late November — which reinforces having more women in board and leadership positions increases a company’s bottom line.

The study looked at 9,000 entities and 15,000 managers globally at Sodexo and found that the gender-balanced management teams (gender-balanced defined as 40-60 percent women), had better engagement, better brand awareness, better client retention and a better financial performance than the teams that were not gender-balanced.

“Women are not inherently better than men or vice versa, but you need all kinds of diversity to get more innovative solutions and diverse perspectives,” Anand said.

Part of what has fueled Europe’s board diversity growth is that various countries have instituted quotas and disclosure agreements to put pressure on companies to get to where they are today.

“In France, the quota is 40 percent by 2017. When they started the mandate, the goal was to have 12 percent of women on boards by 2012. In two years, it’s doubled to 28.4 percent. Clearly this mandate has actually worked,” Anand said, citing the Egon Zehnder findings.

The U.S. shouldn’t only look to European diversity initiatives. An unusual diversity model has made Australia’s progress one of the fastest in the world.

While Australia doesn’t have quotas, a disclosure “peer pressure” agreement was put in place as a result of a 2009 Thomson Reuters study that found that 66 percent of Australian companies surveyed had no women on their boards. That year, then-CEO of the Commonwealth Bank of Australia Ralph Norris publicly set a target of having 35 percent female managers by 2015.

The Australian Stock exchange put pressure on companies and instituted mandatory business reporting. Companies would report if they had women on their boards, and if they didn’t, they were asked, “Why not?” This peer pressure initiative, combined with mentoring programs for companies, had an impact. In 2010, companies with women on their boards grew to 8.3 percent percent and in 2013, they already had 13 percent.

Anand believes that following some version of the Australian diversity model of reporting would make decisions by CEOs and nominating committees a lot more transparent in the U.S.

“In the United States, it’s very challenging because about 50 percent of the companies have a unified CEO and chairman, and that makes it a lot harder to hold the CEO accountable for diversity. There needs to be a lot more transparency in the U.S.,” she said. “Ideally CEOs and nominating committees would be held responsible for considering at least a few female candidates for executive positions, and a great place to start would be making sure at least one woman would be interviewed for every executive position.

“If every Fortune 500 company appointed a second woman on the board, the percentage would go up 3 percent,” Anand said, citing figures from the 2012 Global Conference on Women. “If every other board appointment was a woman, it would reach 30 percent by 2015.”

Photo of Parliament at sunset courtesy of Wikimedia Commons.