(Bloomberg) — French and Swiss financial companies have a higher proportion of former politicians on their boards than their European peers, highlighting the close ties between policymaking and the financial world in the two countries, a study by Ernst & Young has found.
A third of Swiss-based financial services companies and 30% of French ones have at least one director who has served as a minister or member of parliament, compared with just 14% of German, 13% of Italian and 11% of British companies, according to the EY European Financial Services Director Monitor, which tracks directors of companies in the MSCI Europe Financial Index.
Former politicians are in high demand on corporate boards as companies try to navigate rising global tensions and political uncertainty caused by elections, but the close ties between Europe’s political institutions and the private sector have long drawn criticism from transparency groups and concerns about conflicts of interest.
“There are connections between financial elites in European countries, if not all countries around the world,” said Nicolas Bellon, a senior fellow at the Brussels-based think tank Bruegel. He said the trends in his native France show “fewer boundaries between political and financial elites,” who often share “common origins” in education and training.
The European Parliament warned that the so-called “revolving door” phenomenon linking politics and finance could pose “the risk of undermining the democratic fabric of society” unless movement between the two is strictly regulated.
Former Portuguese Prime Minister José Manuel Barroso was the subject of an ethics investigation by the European Commission after he became senior adviser and non-executive chairman of Goldman Sachs Group Inc.’s international operations less than two years after his term as European Commission president ended in 2014. Barroso was later found not to have had any conflicts of interest.
Although he was not a director, the case has reinforced awareness of the potential dangers of former politicians bringing their deep knowledge of the political system to highly paid jobs at banks. EY research found that no European company had appointed a director with experience as a minister or member of parliament in the past 12 months.
And it’s not just board members: banks and finance companies are known to hire outside political experts as well.
Former British Prime Minister Tony Blair signed a reported £2 million ($2.5 million) annual salary as a senior adviser to JPMorgan Chase less than a year after he left office. Former British Foreign Secretary William Hague also joined Citigroup as an adviser in 2017, as Wall Street was preparing to weather Britain’s departure from the European Union. He joins Mervyn King, a former governor of the Bank of England who also advises the bank.
Omar Ali, incoming leader of EY Global Financial Services, said the current climate of rising interest rates and a focus on monetary policy has increased demand for central banking experience.
“The deep experience that central bank decision makers bring is invaluable to firms managing capital ratios, primary liabilities, risk books and investment strategies across the global economy,” Ali said.
EY research found that 9% of companies monitored in the past 12 months appointed a director with central bank experience.
Europe has taken steps to resolve some of the controversy over the revolving door. The EU’s latest Code of Conduct for Commissioners, which came into force in February 2018, restricts the activities of former commissioners for two years after the end of their term. During this period, they must report their new professional activities to the Commission.
Despite these concerns, many argue that the exchange of expertise between financial institutions remains a vital tool for building trust between Europe’s public and private sectors.
“While political appointments can carry risks and the level and nature of experience varies widely, chairmen of European financial services companies are clear that they view political and public office experience as a valuable ingredient in building a resilient board,” EY’s Ali said.
Other findings from the report include:
–With assistance from Laura Noonan.
Read this article at bloomberg.com
HomeCorporate NewsFrench-Swiss finance company tops Europe list for boardroom political ties
Source link
