Boardrooms found wanting as skillset demands evolve

Many of the boards of Europe’s largest financial services firms have been found to be lacking when it comes to the skills, experience, and level of diversity that investors say are important to them.

The research by EY found 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.

The inaugural EY European Financial Services Boardroom Monitor, evaluated the experience, training and skillsets of board directors in the MSCI European Financials Index, as well as at several additional large national institutions. Alongside the Boardroom Monitor, EY teams questioned more than 300 institutional investors in financial companies across the UK, Germany, Switzerland, and France, and mapped their expectations of financial services boards against the status quo in Europe.

“Shareholders of financial companies want to see boards with directors whose collective experience and characteristics reflect the capabilities needed to address the opportunities and challenges facing the sector,” explained Omar Ali, EMEIA Financial Services managing partner. “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.”

Forty-four percent 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 63% male and 37% female.

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, according to the report. 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 at 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 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.

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.

Ali added: “Although the financial sector in Europe has come a long way, many institutions still have a significant journey ahead to meet investors’ expectations on boardroom diversity. Most shareholders believe that having a gender balance matters, yet women frequently make up less than 40% of major European financial services company boards – this has to change. Most firms will want to be ahead of incoming regulation that will mandate more equal gender diversity from 2026. Investors also rightly emphasise the need for boards to have a more diverse age mix, so they can better reflect their customer needs and society.

“Race and ethnicity diversity is notably absent from our research: this is because the data is not yet effectively captured across the industry in Europe. This also needs to be top of mind for financial services firms as they seek to build boards that represent the communities they serve.”

When it comes to sustainability over 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,” said the report. “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.”

The EY 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.

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.

Ali concluded: “The most effective financial services board is one that has strong foundations in traditional areas of expertise but is also 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 and need to be more diverse.

“Board composition constantly changes, and competition for talent is set to escalate as firms across Europe actively diversify the skills and profile of their boards and look to bolster currently underweight areas of experience.”

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, according to the report. 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.

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