Life after Lehman: boards get a makeover: how board composition at financial services companies is taking on a new look.

• Author: Wood, John
• Position: HEIDRICK & STRUGGLES GOVERNANCE LETTER

MUCH HAS CHANGED in the world of finance in the past two years. Previously powerful financial institutions such as Bear Stearns, Lehman Brothers, Washington Mutual, Merrill Lynch, and Wachovia no longer exist in the U.S. Globally, firms like ABN Amro are no longer stand-alone entities. The disappearance and absorption of these firms has taken place alongside a period of unprecedented political intervention in the financial services sector. Around the world, governments have taken stakes or invested in firms across the investment banking, commercial and consumer banking, and finance sectors as well as, in some cases, insurance.

Throughout what we might call this "post-Lehman" period, the boards of financial services companies have been under tremendous pressure to assure stakeholders and policy makers that they have the competencies and the composition to prevent such crises in the future. To find out precisely how this pressure might be affecting board composition and competencies, we analyzed board data for financial services firms in the 18 months preceding the financial crash and compared it with the 18 months following the meltdown. Some key findings:

* The steep increase in board appointments at the 50 largest financial services institutions in the post-crash period differs dramatically from the figures for Fortune 1000 financial services companies overall.

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Appointments at the top 50 financial services companies measured by assets under management (AUM) jumped from 86 to 209, an increase of 143%. The greatest volume of new appointments took place among the top 29 banks (also by AUM), which doubled from 81 precrash to 162 post-crash. By contrast, the number of board appointments for Fortune 1000 financial services firms overall dropped slightly, from 165 during the 18 months prior to the crash to 162 post-crash.

Why the difference between large institutions and the sector overall? In a recent speech, the chairman of one of the world's 50 largest financial services institutions observed that the relentless scrutiny such institutions have faced since the crisis stems from their enormous impact on the global economic stage. That scrutiny has likely resulted in the steep increase in board appointments at those institutions, especially those that received government funds.

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* Previous experience in the financial sector has taken on increased relevance in board appointments for all of the financial...