Yahoo Finance Why the City has much to gain from hiring ex-politicians
In a year in which external challenges have become increasingly interconnected, the symbiotic relationship that could exist between the City and government is worth reflecting on.
With just weeks until the nation heads to the polls and the next government is assembled for a new term, those planning to leave the political world may be weighing up their options.
While it might be easy to assume that many will line up at the ‘revolving door’ between government and financial services, evidence suggests that few who have held public office have pushed through the door into the financial sector’s boardrooms.
We have been analysing the construct of the financial sector’s boardrooms for a number of years, exploring the shifts in gender split, tenure, experience and backgrounds of directors on the boards of the Europe’s largest firms.
In a year of major elections including our own, increasing geopolitical tensions, and ongoing macroeconomic challenges, our analysis of director backgrounds shows that UK financial boardrooms feature fewer directors with previous political experience relative to European peers.
Just a small minority of UK directors across the nation’s largest financial services firms currently have a political background.
Just one in 10 (11%) of the UK’s largest financial boards feature directors who have held office in government, compared to more than a fifth (21%) of boards across Europe. In Switzerland and France, 33% and 30% of the largest financial boardrooms feature the experience of a role in government respectively, bringing a differentiated perspective to the table.
While Britain’s financial boardrooms bring a relatively higher level of experience of civil service or government-appointed roles – present across 89% of UK financial firms versus 80% across Europe – they lag counterparts across the continent in senior government roles.
Beyond the political sphere, very few UK directors across the country’s largest financial firms bring central banking experience, or that of an international institution such as the UN, the World Bank or International Monetary Fund. Just 16% of UK financial services firms’ boards feature directors who have previously worked at acentral bank, compared to more than a quarter (26%) of boardrooms across Europe.
UK-listed banks and asset management firms lead the UK’s largest insurers in terms of overall political experience. While all UK banks and asset management firms have directors who have either held office in government or have experience of a civil service or government-appointed role, just 67% of UK insurance firms have similar experience.
The Global Financial Crisis and the Covid-19 pandemic cast a long shadow for the global financial sector, and society at large, putting tough decisions front and centre of the agenda for many firms.
Between these two seismic events, the experience of UK financial firms was punctuated by another major hurdle, as Britain’s exit from the European Union presented a raft of new operational and regulatory demands.
Now, at a time when economic and geopolitical headwinds are converging to buffet operations in new ways – both at home and overseas – it is worth probing the potential value exchange to be derived from a move from the corridors of power to the City’s boardrooms – and not in the remuneration sense.
Diversity of thought and experience is instrumental in shaping an effective board. Just as a room full of politicians can benefit from – and actively draw on – the experience of those with prior commercial experience, a commercial boardroom with experience of the inner workings of policy making and an understanding of the zeitgeist of the electorate (read, customer base) could arguably be better equipped to face into market challenges.
That is not to say that the appointment of former politicians is without any challenge, particularly when it comes to countering perceptions that such hires are driven by a desire for ‘influence’ or to unlock access to a black book of contacts.
The addition of political expertise to the matrix of skills present in boardrooms must be assessed through the same lens as any other candidate – and result in the resounding conclusion that differentiated experience of this kind can equip a board to effectively challenge, problem solve and, where necessary, back the tough decisions.
After all, the multifaceted nature of financial services’ critical purposes – helping to protect and foster people’s financial security, providing opportunity for wealth creation for families today and tomorrow, and offsetting risks to the stability of our economy among them – are closely aligned with the fundamental role of government in our society.
Ultimately, the top tables of Britain’s largest financial institutions will always benefit from new and diverse perspectives.
Anna Anthony is EY UK’s Financial Services Managing Partner
