The impact of shareholder involvement in the nomination process on board diversity

Controlling the composition of the board is important in corporate governance. In order to prevent incumbent members to capture the nomination process, an external nomination committee has been introduced in some Nordic countries. In Finland both internal and external nomination committees are used by listed companies. This feature provides an ideal case to test whether differences in nominating board members make a difference for board composition.Companies with a nomination committee composed of a group of external experts have,
on average, more female directors on their boards, but less international diversity and less diversity in terms of age dispersion and director tenure. However, these differences become non-significant when the voting rights
of the largest shareholders are included in the regression analysis. The results suggest that when ownership structure is taken into account the procedure used to select director candidates has a limited impact on the final board composition or diversity.