Field Notes_005_The boardroom gap: eight structural choices European mid-market boards refuse to make

"Europe's competitiveness gap is not a policy gap. It is a discipline gap. Brussels controls maybe 15% of the levers. Boards control the rest."

Key takeaway - The conversation about European competitiveness is dominated by the diagnostic class - McKinsey, Bruegel, Draghi - who can describe the problem but cannot prescribe operator action. The structural gap between European mid-market companies and their US and Asian peers reduces to eight specific governance design choices. Three are about capital and portfolio. Three are about people. Two are about speed and visibility. None requires Brussels. All eight sit on the board agenda. The boards that adopt even three of them in the next eighteen months will out-compound their peers for the rest of the decade.

Last month, three separate conversations about European competitiveness all turned - within ten minutes - into a discussion about what Brussels should do next. The room knew the numbers. Belgium's labour tax wedge at 52.5%, the highest in the OECD. EU industrial electricity at roughly twice the US price. Productivity per hour 18% below the United States and widening. The Draghi Observatory's January 2026 audit: 15.1% of 383 recommendations fully implemented after sixteen months.

The numbers were correct. The conversation was wrong.

The competitiveness gap that has emerged between European mid-market companies and their US and Asian peers since the mid-1990s is not, in the proportions that matter, a policy gap. It is a discipline gap. Brussels controls maybe 15% of the levers. Boards control the rest. The Draghi Report, however thorough, will not change a single board agenda in a European mid-market company that has not first decided to change.

This is the fifth entry in the Field notes series. The first four looked inside the company - structure that does not scale, priority that does not hold, supply chains that were patched rather than redesigned, risk management that is decision architecture rather than spreadsheet theatre. This one looks at the layer above: the board. The decisions that compound for two decades are taken - or not taken - there. The diagnosis is uncomfortable. The prescription is straightforward. The willingness to act on it is the variable that separates the European companies that out-compete their cost base from the ones that complain about it.

Why the existing debate fails

Every distinguished European institution that publishes on competitiveness - Bruegel, the European Commission, the major consulting firms, the central banks - has now produced its diagnosis. The Draghi Report is the most comprehensive: 400 pages, 383 recommendations, three principal axes. Its evidence base is unimpeachable. Its implementation rate, sixteen months on, is 15.1%. The remaining 84.9% sit in negotiation, partial implementation, or untouched limbo.

The reason these diagnostic exercises fail to convert into operating change is not effort and not intelligence. The reason is that they are written by the diagnostic class - economists, consultants, policy analysts - for the prescriptive class, which sits in Brussels, Berlin, Paris, and Frankfurt. The intermediate class, the operators who actually run companies in Belgium, the Netherlands, Italy, Spain, Poland, is addressed only indirectly. The implicit message is: wait for the policy to land, and then your environment will improve.

The implicit message is wrong. Or, more precisely, the implicit message is true only for the 15% of competitiveness levers that Brussels actually controls. The other 85% sit on the board agendas of European mid-market companies, almost entirely untouched.

The argument that follows is not policy critique. It is operator prescription. Eight structural choices, grouped into three themes. Each one is something US and Asian boards do as a matter of course and most European boards refuse to even put on the agenda. Each one is fully controllable at the board level. None requires Brussels. All eight compound.

The one concept underneath

The gap between US and European mid-market governance reduces to a single operational distinction: the design of the board's relationship with the operation. US and Asian boards operate as working bodies. They concentrate capital, fire underperformers, set prices quarterly, force decisions to a named owner, and consume operating data in real time. European mid-market boards - particularly in continental Europe - operate as supervisory bodies. They review, they advise, they exercise oversight. They do not make the eight choices that follow. They review the people who do not make them.

This is the design property the existing competitiveness literature does not see, because it sits one layer below where consultants and economists work. Strategy is downstream of structure. And board design is upstream of every strategic decision a company is capable of taking.

I. Capital & portfolio - where capital goes, and what stays

The first three choices are about capital and portfolio composition. They are the choices the board makes about which businesses get fed, which businesses get starved, and what the company charges its customers.

1. Concentrate capital. Do not distribute it democratically.

US boards approve a capital budget that picks winners. They starve mature divisions to feed growth ones. They reallocate capital across the portfolio aggressively over a decade. European mid-market boards approve project lists. Each P&L owner submits a slate of investments; the board approves more or less proportionally to the prior year, after some debate; capital follows operational politics rather than expected return.

McKinsey's work on capital reallocation rates is the cleanest measurement of this gap. Top-quartile US boards reallocate approximately 50% of capex across the portfolio over a decade. European mid-market reallocates closer to 20%. Over fifteen years, a 50% reallocator compounds capital at twice the rate of a 20% reallocator on the same revenue base. The productivity divergence between the US and the European mid-market begins, mathematically, here.

The board action is simple to describe and politically painful to execute. Once a year, the board reviews the capital plan not as a list of projects but as a portfolio of bets. The board names two divisions that will receive more than their proportional share and one that will receive less. The CEO is given explicit cover to underfeed the loser. The decision is recorded. Twelve months later, the board measures whether the reallocation happened or whether the loser was reinflated by the politics of the executive committee.

2. Active divestiture as a strategic muscle.

US groups divest underperforming divisions on what looks, from the outside, like a five-year clock. Honeywell, Danaher, GE pre-breakup, Emerson - all built reputations on portfolio rotation. The cumulative effect over twenty years is the deliberate concentration of capital in the businesses where the group has a structural advantage. Underperformers are sold to acquirers who do have an advantage in those segments. Capital recycles to higher-return uses.

European groups carry legacy divisions for twenty years out of sunk-cost loyalty, family-name preservation, and the absence of an institutional muscle for portfolio surgery. Solvay, Bekaert, Umicore eventually did the work - and the recent breakups and divestitures these names have executed prove that the European mid-market can rotate. But the typical interval between the case for divestiture becoming clear inside the executive committee and the divestiture actually happening in continental Europe is closer to a decade than to two years.

The board action is to put portfolio review on the standing agenda - not as an annual strategy ritual, but as a quarterly question. Which division would we buy today at its book value? Which would we not? What is the disposal plan for the second category, with a named deadline? A board that cannot answer those three questions about its own portfolio has accepted, by default, that capital will continue to be allocated by inertia.

3. Pricing as a quarterly board discipline.

US boards review price as a P&L lever every quarter. They look at margin per customer, margin per SKU, willingness-to-pay surveys, price-pack architecture, and the dispersion of realised prices against list. European boards review price annually, often as a "marketing decision," and frequently delegate it entirely to the commercial layer.

Simon-Kucher's Global Pricing Study shows that a 1% price increase, holding volume, delivers approximately ten times the EBITDA impact of a 1% cost reduction. The same study consistently shows that European mid-market companies sit 200 to 400 basis points below their pricing optimum. The unclaimed margin sitting in pricing - not in cost, not in volume - is, for the typical Belgian mid-market company, larger than the entire annual operational improvement programme.

The board action is to add a one-page pricing dashboard to every quarterly board pack: list price versus realised price by top customer, year-on-year list-price movement by category, share of revenue under multi-year contracts without escalator clauses, and the year-to-date EBITDA impact of pricing actions taken - or not taken. The dashboard does not require a new system. It requires the board to ask the question.

II. People — who builds, who stays, who leads

The next three choices are about the people the company employs, the people it removes, and the people who lead. These choices are uncomfortable because they touch directly on culture, social contract, and the way European employment law shapes what is feasible. They are not, on inspection, less controllable for that reason. They are simply choices that European boards have not been willing to make.

4. Push equity ownership deep into the org - top 50, not top 5.

US growth companies extend equity ownership to approximately the top 50 operators in the company. Stock options, restricted stock, phantom equity, profits-interest structures - the instrument varies; the principle is the same. The people who make the decisions that move the enterprise value own a share of the enterprise value. European mid-market companies, by long-standing convention, reserve equity for founders and the C-suite. The top 50 operators - the ones who run the divisions, the regions, the major customer accounts, the engineering disciplines - receive cash bonus only.

The result is a one-way flow. The best mid-level operators in European mid-market companies move, when they move, to employers who offer equity. Often the destination is a US-headquartered company with a European office. Often the destination is a venture-backed Belgian or Dutch scale-up. In both cases, the legacy European mid-market company has built a person it then exports.

This is, of all eight choices, the one that costs the least to fix and that European boards refuse most consistently. The legal vehicles exist. The Belgian Stock Option Law of 1999, modernised since, allows a clean extension of equity-linked compensation deep into the organisation. The decision not to extend it is cultural, not legal.

5. Underperformer turnover.

US white-collar involuntary turnover sits between 5 and 10% per year, depending on sector and macro cycle. European mid-market white-collar involuntary turnover sits below 2%. The gap is the single most uncomfortable structural difference between the two systems. Every CEO who has worked in both knows it. Almost nobody writes about it publicly.

The European justification - strong worker protections, predictable employment law, the social compact - is real. The cost of the justification is also real. A board that does not address persistent underperformance is not protecting the social compact. It is paying the cost of underperformance and then asking its best people to make up the difference. The best people, predictably, leave (see choice 4).

The board action is not to import US-style at-will employment, which is neither feasible nor desirable inside the Belgian or wider European legal framework. The board action is to require, every twelve months, an explicit review of the bottom decile of management performance. The output of that review is not necessarily a separation. It is a documented plan: improve to a defined standard within a defined window, redeploy, or separate. The discipline is not the firing. The discipline is the willingness to name the problem at board level instead of letting it sit.

6. External CEO hiring as a normal option.

Spencer Stuart's recurring CEO succession surveys show that US large-cap external CEO hires represent roughly 40% of new appointments. The Belgian mid-market figure is closer to 5%. Continental European mid-market companies hire from within almost as a default, with rare exceptions when a family transition forces an external choice.

The institutional argument for promote-from-within - cultural continuity, deep operational knowledge, lower transition risk - is well-known and partially true. The institutional cost of promote-from-within in a structurally underperforming sector is less well-known. The cost is the absence of strategic reset. A CEO who was the best division head three years ago will, in 80% of cases, run the company the way the company was run. The 20% of cases where an internal candidate breaks the prior model are the exceptions that distinguish exceptional European mid-market companies - and even there, the break is usually painful and slow.

The board action is to write the next CEO role specification before there is a vacancy, and to write it as if the entire labour market were eligible. Then to commission a search that actually surveys the entire labour market - not as a courtesy to the existing internal candidate, but as a deliberate calibration of what the role could attract. The internal candidate may still win. But the board will know what it traded away by choosing them.

III. Speed & visibility — the decision metabolism

The final two choices are about the rate at which the board can read the company and act on what it reads. They are the choices that determine the company's decision metabolism - the speed at which information becomes decision, and decision becomes execution.

7. Single working board, not separated supervisory + operating.

Continental Europe's two-tier governance model - supervisory board distinct from management board - was designed for a different era of capitalism. Its function was to discipline managerial agency by keeping the supervisory function structurally separate from the executive function. The cost, then and now, is decision latency. Every strategic question must travel from the executive layer to the supervisory layer, be deliberated separately, return with comment, and converge again before action. The typical added latency is six to twelve weeks per strategic decision.

The US single-board model collapses the loop. The board contains independent directors who function as both supervisors and active strategic counsel. Decisions take days, not months. The trade-off is real - agency risk is higher under a single-board model -but the speed advantage compounds over years.

Eg. Belgian SMEs operating under the société anonyme / naamloze vennootschap framework have, in practice, the option to choose the single-board model. The 2019 Code of Companies and Associations explicitly permits it. Almost no Belgian mid-market company exercises the option, even when the company is owned by a single family or PE sponsor and the supervisory–operating distinction is essentially fictional. The decision to retain the two-tier structure when it could be collapsed is a six-to-twelve-week tax the board pays for no benefit it can articulate.

8. Real-time financial visibility.

The US mid-market in 2026 typically operates from a live FP&A dashboard, updated daily, accessible from the executive team's phones. Revenue, cost, working capital, cash position, and operational KPIs are visible within twenty-four hours of the underlying transactions. The European mid-market in 2026 typically operates from a month-end close - closing on day five to seven of the following month - followed by a board-pack PDF assembled over the next week. The information the board acts on is, structurally, six to ten weeks behind reality.

The technology gap is now negligible. Workday, Anaplan, Pigment, Vena, and a long tail of mid-market FP&A platforms have made live financial visibility a five-figure annual investment for a company of any meaningful size. The decision not to invest is not a budget decision. It is a board decision about the rate at which the company expects to think.

The board action is to require, within twelve months, a five-number live dashboard accessible at any time: trailing twelve-month revenue and EBITDA, current-month variance to budget, working capital tied up versus benchmark, cash balance and runway, and one operational lead indicator per division. Five numbers. Live. The board pack stops being a deliverable and becomes a snapshot.

What this changes for a EU mid-market board

The eight choices above are not equally accessible. Choice 3 (pricing) and choice 8 (live visibility) require no organisational change and no employment-law consideration - they are pure process choices, executable inside ninety days. Choice 1 (capital reallocation) and choice 2 (divestiture) require courage but no system. Choices 4 (equity), 5 (turnover), 6 (external CEO), and 7 (single board) require more structural change and longer horizons.

A board adopting this Field Note as a working document would prioritise sequentially:

• Quarter 1 - install the pricing dashboard (choice 3) and the live five-number visibility layer (choice 8). Combined, they shift the metabolism of the company in ninety days.

• Quarter 2–3 - execute the first concentrated capital reallocation cycle (choice 1) and put portfolio review on the standing agenda (choice 2).

• Year 2 - design and approve a deep equity programme (choice 4), and adopt a managed underperformance review process (choice 5).

• Year 3 - at the next CEO succession, write the role spec for the entire labour market (choice 6), and consider the single-board governance migration (choice 7) at the same governance review.

  
  

This is, in total, a three-year board programme. Run honestly, it changes the trajectory of a mid-market company at a depth that no policy decision in Brussels will match in the same window.

The harder discipline

The frameworks above are not new. Every one of the eight choices has been written about, modelled, and benchmarked by McKinsey, BCG, Spencer Stuart, Simon-Kucher, or Bruegel in the past decade. What was missing, until now, was the conviction at the European board level to act on what the frameworks reveal.

After 2024, the conviction trade looks different. The macro environment has stopped offering the European mid-market the cushion that allowed two decades of soft governance to feel acceptable. Energy prices have doubled the US price. Tariff volatility has repriced trade. Capital is migrating to US assets at the structural rate. The productivity gap, now 18% and widening, is no longer a curiosity. It is the headline. A board that meets that environment with the same governance design that produced the gap is making a deliberate choice to lose.

The harder discipline is not the methodology. The methodology can be installed in a year by any competent board. The harder discipline is the willingness to do the work - to name the bottom decile, to write the external CEO spec, to collapse the two-tier board, to put a real number on the pricing optimum - when the inheritance of European mid-market governance pushes uniformly in the other direction.

That work is not delegable. It is also the work that compounds - the only work, year over year, that actually changes what a company can become.

The next Field Note picks up the parallel question: how the operator chair changes when the board genuinely operates this way.

Ruben Claessens is CEO of an industrial group in Belgium and founder of LIDI partners BV Field Notes is the public archive of his work on operatorship, governance, and Belgian mid-market reality. Published deliberately, on a monthly cadence.

- Brussels, June 2026