On Environmental, Social, And Governance
What Next for Diversity in the Boardroom?
Beyond gender: Diversity through a multidimensional lens.
Jocelyn S. Brown, Head of Governance, EMEA and APAC
Key Insights
  • Ensuring a meaningfully diverse board involves recognizing that diversity is multidimensional and goes beyond gender.
  • What characteristics are considered diverse will vary by market.
  • Investors and portfolio managers are playing a key role in driving diversity within their investee companies.


The extract below is taken from T. Rowe Price’s What Next for Diversity in the Boardroom? white paper, which takes a closer look at progress across Europe, Asia Pacific (APAC) region, and the U.S. The paper discusses our approach to boardroom diversity in more detail and examines how investors should hold themselves to the same standards they hold portfolio companies.


Board composition can speak volumes about a company’s wider culture. Ensuring a meaningfully diverse board means recognizing that diversity goes beyond gender to include ethnicity, nationality, disability, socioeconomic background, sexual orientation, and other dimensions—though measurement limitations can prove challenging. A diverse board composition should lead to better business decisions by reducing the likelihood of groupthink. Moreover, a board that is significantly different from the company’s wider workforce and customers risks missing emerging issues and opportunities. While some markets are making more rapid progress than others, developments across Europe can give investors a good idea of the possible trajectory for companies in other parts of the world.

"A diverse board composition should lead to better business decisions by reducing the likelihood of groupthink."

In the U.S., research carried out by the Conference Board highlighted that companies will face challenges in boosting the diversity of backgrounds, skills, and professional experience on their boards if they continue to elect directors at the current rate. In the S&P 500, as of July 2022, the percentage of newly elected directors has held steady at 9% since 2018, for example. In comparison, across the UK’s FTSE 350 Leadership population, the turnover is around 22%, with almost two of every three roles going to men.1 The key difference is that the UK has annual elections as standards, whereas there are still a lot of classified boards in the U.S. To encourage the adoption of annual elections in the U.S., in 2022 T. Rowe Price has generally opposed the reelection of non‑executive directors at companies where a classified board has been in place for longer than 10 years and where there are no disclosed plans to switch to annual elections.

In Japan, board diversity has been a focus for our voting and engagement in recent years, with the country having an unusually low proportion of female directors among developed markets. Elsewhere, there has been steady progress in Australia. Across ASX100 companies, for example, the percentage of women on boards rose from 11.8% in 2010 to 32.2% in 2020. There have also been encouraging developments in Hong Kong, with the Hong Kong Stock Exchange’s recent adoption of a board diversity rule.2

"We are seeing more structure and higher expectations in the UK and across Europe."

We are seeing more structure and higher expectations in the UK and across Europe. European Union negotiators recently agreed that at least 40% of women must be represented in non‑executive boards of listed companies, or 33% among all directors, by June 2026. Regulators are faced with a tricky balancing act between when to legislate—which risks being overly prescriptive—and when market initiatives will be able to deliver the required change.

How Investors Can Drive the Diversity Agenda

A lack of regulatory support in some regions does not mean diversity is falling off the radar. Asset managers are increasingly using their influence through stewardship and engagement to effect positive change. During the first half of this year, as part of the proxy voting season, T. Rowe Price opposed the reelections of 145 directors across 107 companies globally, as of June 30, 2022, due to concerns over a lack of gender diversity on their boards. An additional 31 directors across 22 companies were reviewed under this policy.3 However, we decided to support them or register a cautious “abstain” on their elections because we found mitigating factors that explained the low level of board diversity.

The objective of T. Rowe Price’s stewardship program is to foster long‑term success for investee companies. It is important that our expectations are clearly communicated and that there is an escalation plan in place if our expectations are not met within a reasonable time frame. A market‑by‑market stewardship approach is crucial when it comes to assessing a board’s composition, recognizing that regional corporate governance codes around the world apply different expectations.

To find out more, read the full What Next for Diversity in the Boardroom? white paper.

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1 FTSE Women Leaders Review, Achieving Gender Balance. February 2022.

2 The Stock Exchange of Hong Kong Limited. The Revised Corporate Governance Code and Listing Rules came into effect on January 1, 2022: https://www.hkex.com.hk/News/Regulatory-Announcements/2021/211210news?sc_lang=en

3 On November 19, 2020, T. Rowe Price announced plans to establish T. Rowe Price Investment Management, Inc. (“TRPIM”), a separate, U.S.‑based SEC-registered investment adviser. TRPIM has a distinct investment platform with independent research and stewardship teams. TRPIM makes proxy voting decisions separately from other parts of T. Rowe Price. The separation of TRPIM’s investment platform became effective July 1, 2022. Given that the proxy voting reporting period, which ended June 30, 2022, coincided with the formal launch of TRPIM, the vote results presented in this material represent the combined voting activities of both entities: T. Rowe Price Associates, Inc., and T. Rowe Price Investment Management, Inc. In future reporting periods, we will reflect the activities of each entity separately. Other information presented in this material reflects that of T. Rowe Price Associates, Inc.

Important Information

This material is provided for general and informational purposes only and is not intended to provide legal, tax, or investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of November 2022 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.

International investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments. These risks are generally greater for investments in emerging markets. There is no assurance that any positive impact or objective can be achieved. Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. Actual future outcomes may differ materially from expectations. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc., distributor, T. Rowe Price mutual funds. T. Rowe Price Associates, Inc., investment adviser.

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