A third of UK Financial Services Directors sit on at least four boards, as investors raise concerns of overboarding

• Board commitments: UK financial services board members hold an average of three board positions and a third (33%) hold at least four
  • New EY poll finds that 82% of investors believe sitting on three or more boards – rising to 85% if one role is c-suite – could present significant challenge to directors’ abilities to govern effectively 
• Churn rate snapshot: 9% of UK financial services board directors departed their board positions in H1 2023, with new appointees replacing them at a far lower rate of 5%
  
  
• Expertise: 18% of UK financial services board directors appointed in H1 2023 have professional sustainability expertise, while 55% have professional tech expertise*
  
  
• Gender: More than a fifth (21%) of UK financial services boardrooms are yet to reach the FCA’s target of 40% female representation, a figure which rises to 29% within UK banks
  
  
• Age: Less than 1% of UK financial services board members are under the age of 40; the average age of is 60

Board directors serving the UK’s largest financial services firms currently hold an average of three board seats each, and a third (33%) hold four or more, according to the latest EY European Financial Services Boardroom Monitor. This comes as new sentiment polling data finds that 82% of European investors surveyed believe that holding board positions at three or more firms – rising to 85% if one is at executive level - could present a significant challenge to board directors’ abilities to fulfil their duty of governing a company.

The EY Boardroom Monitor charts the profile, experience, training and skillsets of board directors across the MSCI European Financials Index and is supplemented with a sentiment polling survey of 300 European financial services investors.

Amongst the most senior board members at UK financial services firms – chairs and executive directors – the average number of positions held is two. Across all European board members, sitting on more than one major financial services board is less common: only 2% of directors tracked hold two or more board roles at the largest European financial services firms.

When asked to identify the primary driver behind directors assuming multiple board positions, just over a quarter (26%) of investors cited board members’ desires to gain broader experience and over a fifth (22%) cited remuneration. Separately, 19% of investors believe it relates to a shortage of female candidates with sufficient experience, however, current EY Boardroom Monitor data does not support this, finding that the proportion of women sitting on three or more boards correlates with the gender split of the total director population tracked.

From a sector perspective, directors at UK financial services firms holding multiple board positions are most common within banking, where 65% of board members hold more than two board positions. In the insurance and asset management sectors, 40% and 39% respectively of board members hold more than two board positions.

From a UK regulatory perspective, while there are limitations to some board director portfolios, there is no blanket regulation to restrict or mandate the number of board roles that can be held by an individual. 

Anna Anthony, EY UK Financial Services Managing Partner, comments: “Financial services firms in the UK are operating in an increasingly complex external operating environment and are focused on building highly skilled, relevant and resilient boardrooms. There are many valid reasons for board members to hold more than one position, but a careful balance must of course be struck.

“Companies and chairs are looking to appoint a diverse board of directors with the right skillsets and breadth of experience, while also ensuring that all members have the capacity to fulfil the demands of these critical governing roles – both during business as usual and during times of stress. Striking this balance can be particularly challenging when the pool of board-level candidates is small.”

A ‘changing of the guard’ across the UK’s financial boardrooms?

In H1 2023, data from the EY Boardroom Monitor shows that boardroom exits constituted 9% of total boardroom members, with new appointments lagging departures within the six-month snapshot** at 5% of the total UK director population. In comparison, 10% of board directors of financial services firms in EMEIA departed their board positions in H1 2023.

The UK’s insurance sector had the greatest proportion of boardroom exits in H1 2023, with 12% of board members leaving their roles compared to 9% of board members at UK banks and 7% of board members at UK asset management firms. Of the newly appointed directors in H1 2023, 55% were in the insurance sector, and 45 % were in the banking sector. Despite 7% of board members at UK asset management firms departing in H1 2023, there were no new appointments in the sector during this period.

The average tenure of members departing UK financial services boardrooms during H1 2023 was 75 months, relative to 81 months across all UK boardroom members. 

Against a backdrop of high boardroom turnover, almost three quarter of investors (74%) anticipate an increase in investor action during AGMs – whether voting against board members or proposing new board members – over the next five years to rectify any perceived lack of experience or diversity in specific areas.

Incoming board members increase c-suite and tech expertise

When assessing the collective skills, expertise and experience of board members in the context of investing in a European financial services firm, 87% of investors state that experience in both digital/tech and ESG/sustainability is valuable, and 83% state that c-suite experience is valuable. Professional experience indicates official qualifications or roles previously or currently held in the related field.

Of UK board members appointed in H1 2023, 55% have professional experience in tech, while 18% bring professional experience in sustainability/ESG. Meanwhile, a very strong 91% have the experience of an executive position (significantly improving on the 74% with c-suite experience who departed their roles in H1 2023). Of board members appointed in H1 2022, 22% had professional experience in tech, and 26% had professional experience in sustainability. For context, of the full EY Boardroom Monitor director population, just 14% of board members bring sustainability experience and 18% have tech experience.

UK insurers lead on ESG and tech hires in H1 2023

Seventeen per cent of UK insurers appointed board members with professional experience in sustainability/ESG in H1 2023, compared with 14% of banks.

When it comes to tech expertise, half (50%) of UK insurers hired board members with professional experience in tech in H1 2023, compared to 29% of banks.

Omar Ali, EY EMEIA Financial Services Managing Partner, comments: “Against a volatile market backdrop and, at times, major pressures on the European banking sector, financial services boardrooms across Europe have visibly evolved in a short period.

“Participants in the 2023 EY European Financial Services Chairs’ Interview Series feel a mix of skills and more c-suite experience is crucial to cover all aspects of board activity, and it is encouraging to see this coming through in new appointments. Chairs are looking for new non-exec directors to have a strong understanding of the firm’s current performance in relation to the economic cycle and its commercial operating environment.”

Anna Anthony adds: “While we’ve tracked a number of exits in UK financial services boardrooms since January, many firms have seized the opportunity to integrate new skills and strategic experience within their boards – particularly in the area of tech.”

One fifth of UK's financial boards are yet to reach 40% female representation

Eighty-two per cent of European financial services investors state that the gender diversity of the boardroom has a significant influence on their decision to invest, compared to just 6% who say it does not influence their decision at all.

Of board appointments made at UK financial services firms over the past year (July 2022 – June 2023), 42% were female candidates, representing a 17-percentage point fall year-on-year from 59% in the year to June 2022. Of board appointments made in the first six months of this year, 27% were female and 73% were male. Overall, the current gender split of UK financial services board members remains at 43% female and 57% male. 

One fifth (21%) of listed UK financial services firms have under 40% female representation in their boardroom, which is the level required by the FCA’s rules on diversity and inclusion for company boards and executive management, which applied to all listed companies for financial accounting periods starting from 1 April 2022.

On a sector basis, the gender diversity of UK banks lags the insurance and asset management sectors. Almost a third (29%) of banks have under 40% female representation within the boardroom, compared to 17% of insurers and of asset management firms respectively.

The EY Boardroom Monitor also provides clear evidence that women in board roles continue to be less likely to have worked in c-suite roles. Across the UK's financial boardrooms, 57% of female board members (53% in Europe) hold or have held a c-suite position, relative to 77% of their male counterparts (65% in Europe).

Less than 1% of UK board directors are under the age of 40

Eighty-four per cent of European financial services investors state that the age diversity of the boardroom has a significant influence on their decision to invest, compared to just 6% who say it does not influence their decision at all.

Despite this, fewer 1% of UK financial services directors are under the age of 40. The average age of directors across UK financial services boardrooms is 60. For women it is 58, and for men it is 61 – both consistent with the average ages in January 2023.

Anna Anthony concludes: “Investors place significant value on boardroom diversity, and UK financial firms know they must continue to increase female representation, especially amongst women with c-suite experience. Another key focus is the potential of younger talent – an area which UK firms lag their European peers on, and one that has seen slower than expected progress over the last year. Diverse views, backgrounds and experience are crucial to robust and progressive governance, and to creating the challenge culture required for effective boardrooms. However, in order to achieve this – and to avoid over-reliance on individual directors – a stronger talent pool and growing pipeline of wide-ranging candidates is crucial.”

Data overview as at June 30 2023:

• Companies covered in the UK: 19
  
  
• Total number of UK financial services board directors monitored: 208
  
  
• Total number of female board directors monitored: 89
  
  
• Total number of male board directors monitored: 119

Notes to editors:

• Professional experience indicates official qualifications or roles previously or currently held in the related field
  
  
• The EY European Financial Services Boardroom Monitor does not yet have historical data on boardroom churn rates; board director movement reported in this press release is presented as a snapshot
  
  
• From a regulatory perspective, while there are local market limitations to some director roles, there is no blanket regulation applied across European financial services markets to restrict or mandate the number of board roles that can be held by an individual
  
  
• This is the third launch of the EY European Financial Services Boardroom Monitor, and data is current to 30th June 2023
  
  
• The EY European Financial Services Boardroom Monitor does not track the race and ethnicity of board members, as there is no standardized format for directors to disclose against
  
  
• This release incorporates a survey of 300 European and UK-based fund managers undertaken between May-June 2023, who have, or are able to have, exposure to European financial services companies within their portfolios.