- European financial services firms – among them ten headquartered in Switzerland – meet shareholder expectations in traditional areas of boardroom experience, including politics, accountancy, legal and compliance
- While gender diversity remains below investor expectations, the data shows more female than male board appointees have been made over the last three years
- In the ten Swiss firms asked for the survey, 28% of the board members are female
- Directors with sustainability, FinTech and cybersecurity experience are underrepresented in the boardroom, according to investors
- Board appointments in sustainability and technology are accelerating, with almost half of directors with experience in these areas recruited in the last three years
Many of the boards of Europe’s largest financial services firms are underweight when it comes to the skills, experience, and level of diversity that investors say are important to them, according to the first EY European Financial Services Boardroom Monitor. Released today, the research finds that while European financial services boards have strong credentials in politics, finance, accounting, legal and compliance, they do not yet have the gender diversity, sustainability or technology expertise that investors say they look for when deciding if a company is an attractive investment.
EY’s Boardroom Monitor charts the experience, training and skillsets of board directors in the MSCI European Financials Index, and at several additional large national institutions. A total of ten big Swiss companies from the finance and insurance industry are part of the study's sample with 110 directors at boardroom level. Alongside the Boardroom Monitor, EY canvassed the views of more than 300 institutional investors in financial companies across the UK (202), Germany (33), Switzerland (34), and France (33), and mapped their expectations of financial services boards against the status quo in Europe.
Bruno Patusi, Financial Services Country Leader at EY in Switzerland, comments: “The Boardroom Monitor shows that boardrooms across Europe demonstrate a great depth of experience in many of the traditional areas which investors deem valuable. While they may be underrepresented in newer areas, such as sustainability and tech, and still have work to do on diversity, we can see action is being taken to address this.”
Boardrooms lag investor expectations in terms of gender diversity
44% of investors surveyed claim gender diversity in the boardroom significantly influences their decision to invest in a financial services company, compared to only 16% who say it does not influence their decision at all. Although all European financial services firms monitored have some female representation at boardroom level, the current gender split across all firms stands at 37% female and 63% male. Looking at Swiss banks and insurers, the percentage of female board directors is even lower: The gender split stands at 28% female and 72% male.
The German financial services boardroom is the least gender diverse, where the current gender split of board directors in Germany is 25% female, 75% male. Overall, France and Italy are the most advanced in gender diversity at boardroom level. The gender split among board directors in Italy is 47% female, 53% male, and in France, it stands at 44% female, 56% male. In the UK, the gender split among board directors is 39% female, 61% male.
Gender diversity is highest among board members of wealth and asset management firms, where 41% are female and 59% male. Across banking boards, this drops to 37% female and 63% male, and within insurers, it is 36% female and 64% male.
However, the EY Boardroom Monitor data suggests that women are becoming increasingly better represented at boardroom level. Analysis shows that 42% of female board members have been appointed within the last three years, whereas only 31% of male board members have been appointed within the same period. The average board tenure for female directors is 55 months, compared to the average board tenure for men of 65 months.
Diversity in boardrooms – more than gender
Andreas Blumer, Chairman of EY in Switzerland, comments: “Gender diversity is crucial for boardrooms, but diversity is more. It is about age diversity, skills diversity.” In Switzerland, says Blumer, also regional diversity can be very important for having an effective board of directors: “In a country with more than one official language it can make sense to have all of them represented at boardroom level. This is also the case if a company is operating on a global scale: It can be crucial to have boardroom directors from different countries and continents, especially Asia.” On age diversity, 45% of shareholders believe financial services boards need representation from a wide age range to operate effectively in a digital era. Just under a third (31%) of shareholders believe boardrooms do not need representation from a wide age range. Despite these views, only 8% of companies monitored have any board members under the age of 40.
Only 3% of European financial firms have no political experience in the boardroom
More than half (51%) of institutional investors say having political experience within the boardroom is ‘significant’ in terms of making a company an attractive investment, including a quarter (25%) who think it is ‘highly significant’. Ninety-seven per cent of financial services firms monitored have at least one board member with experience of working in politics or for a government industry body, and 44% of all businesses monitored have more than a third of their boards comprised of individuals with political experience.
The market with the lowest political expertise is Italy, where just 20% of board directors have this skillset. At a sector level, 100% of asset management and insurance boardrooms contain political experience, while in banking, 94% of firms have political experience within their boardrooms.
All firms have at least one board member with accountancy and finance experience
50% of investors believe that having experience in accountancy within the boardroom has a ‘significant’ or ‘highly significant’ impact in terms of making a company an attractive investment, compared to only 17% who say it has a ‘not at all significant’ impact. All financial companies monitored demonstrated at least one board member with experience in accountancy and finance, and 70% of companies have two or more board members with experience in accountancy.
Six in ten firms have legal and compliance experience within the boardroom
More than half (51%) of shareholders say it is a ‘significant issue’ if a firm has little or no board-level experience in legal and compliance, with 22% of this group of institutional investors believing it is a ‘highly significant’ issue. Fifty-nine per cent of companies monitored have a board director with a legal and compliance career background.
When compared with wealth and asset managers, banks and insurers have a markedly higher degree of experience in legal and compliance within their boardrooms. Seventy-one per cent of insurers, and 69% of banks, have individuals with experience in legal and compliance within their boardrooms. Only 28% of wealth and asset management firms have board directors with similar experience.
Sustainability, FinTech and cybersecurity experience expected to be in high demand going forward
More than half (51%) of investors believe boardroom experience in sustainability has a ‘significant’ impact in terms of making a company an attractive investment, with 22% indicating it has a ‘highly significant’ impact on a company’s investment case. However, less than a fifth (19%) of companies monitored currently have board directors with any background experience in sustainability.
Insurers and wealth and asset managers significantly lag banks in terms of their level of sustainability experience within the boardroom. While 34% of bank boards have individuals with sustainability backgrounds, only 11% of wealth and asset managers, and just 4% of insurers, have similar experience at board level. Across all European financial services companies, just 2% of board members have professional experience in sustainability.
Board directors in Switzerland and Germany are the least likely to have sustainability experience, according to the data. Only 1% of board members at Swiss firms and 1% of board members at German firms have any professional experience in sustainability. In both France and the UK, 3% of board directors have professional experience in sustainability.
However, the EY Boardroom Monitor data suggests that there is an accelerating trend across Europe of appointing board members with sustainability experience. Analysis shows that 45% of directors with sustainability experience have been appointed to their position in the last three years, and the average tenure of all directors with sustainability experience is 49 months, compared to the average for all board directors of 59 months.
Andreas Blumer says: “Often the required expertise is very specific. Board members need broad knowledge to be able to act competently in many areas.” Blumer explains that it is often better to "buy-in" deep knowledge in a certain field, such as sustainability. “If a board has to decide on an ESG topic, then you bring in ESG specialists from outside to shed light on the issue so that the board can make its decision afterwards.”
Within European financial firms, FinTech and broader tech experience is lowest among insurers
The majority (54%) of investors in financial companies believe firms should typically have boardroom level experience in FinTech. However, only 9% of financial services firms monitored have any experience in this area among their board of directors.
Banks and wealth and asset managers have significantly more FinTech experience within their boardrooms than insurance firms. Across both banks and wealth and asset managers, 11% have individuals with experience in FinTech within their boardrooms. Only 4% of insurance firms have similar experience.
However, the data suggest that FinTech experience is becoming more important to European financial services boards. Analysis shows that 88% of directors with experience in FinTech were appointed within the last four years, and the average tenure of all directors with FinTech experience is 32 months, compared to the average for all board directors of 59 months.
More than half (53%) of shareholders believe it is a ‘significant issue’ if a company has little or no experience in cybersecurity within its board of directors. But while 53% of financial services companies have at least one board director with a background in tech, none of the European financial services firms monitored have any board members with career experience in cybersecurity.
Insurance firms have notably less tech experience within their boardrooms than banks and wealth and asset managers. While 63% of banks, and 56% of wealth and asset managers, have individuals with tech experience within their boardrooms, just 42% of insurance firms have similar experience.
Again, the data suggests that boards are taking steps to address this skills gap. Analysis shows that almost half (46%) of board directors with experience in tech were appointed within the last three years, and the average board tenure of all directors with tech experience is 51 months, compared to the average for all board directors of 59 months.
Human capital – HR is a clear emerging area of focus for financial boardrooms
The EY Boardroom Monitor found that 20% of European financial services boards currently have at least one board member with a career background in human resources (HR), half (50%) of whom have been appointed to their role in the last three years, indicating an increasing HR focus at board level in recent years. The average tenure for a board director with HR experience is 40.5 months – much lower than the average 59 months across all directors monitored.
Bruno Patusi concludes: “The most effective financial services board is one that is able to think ahead of the market, pre-empting change, influencing strategy and better managing risks. To be able to do that, boards increasingly need a stronger understanding of sustainability and technology.” According to Patusi, this can be best achieved by representing this knowledge directly in the board.
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