As someone who wants the financial sector to thrive, Claude Marx, the Director General of the financial sector regulator the CSSF, has been a long-standing advocate of diversity in senior management and on boards. In an interview, he spoke to us about the depth of the problem and why businesses must address this challenge urgently.
Women are paid 23% less than men in the Luxembourg financial services sector, said a recent report* by the national statistics office. Mr Marx notes this gap is central to the lack of diversity in the country’s boards and senior management. Not only is this unjust, but it is also harmful to the businesses themselves.
“Ultimately, diversity is a societal issue, but also a staffing issue, a customer issue, a reputational issue, and a commercial issue,” said Mr Marx. “Numerous academic studies especially in the US have shown that companies with more diverse executive teams and boards are more successful”. Younger generations of employees and consumers will likely expect and insist on this also” he added.
Symptom of good governance
He also sees it as an indicator of good governance practices - a sign that the organisation is actively pursuing policies to encourage fresh thinking and counteract groupthink. Biases are reinforced by like-minded groups of decision-makers. “The focus on ESG now is helping, because this is part of the G: the governance component,” he said. “And unlike most aspects of ESG, gender diversity is relatively easy to measure.”
It is also a topic that is attracting the interests of lawmakers and regulators. Until now, Mr. Marx noted that measures such as the European Banking Authority (EBA) guidelines have been relatively vague, but the “Women on Boards Directive” which will come into force in June 2026 will be more prescriptive. The EBA is also consulting on how diversity could be incorporated into the framework of the Capital Requirements Directive and will reinforce its guidelines.
“The only countries in the EU where gender diversity has improved significantly in the financial sector are those which have imposed quotas,” Mr Marx said, before adding, “but I don’t like quotas: they are a sign of failure and are ultimately a bad solution.” However, he sees a chicken and egg situation, as the lack of diversity among decision-makers leads to a perpetuation of the current lack of fair representation. “If the problem isn’t fixed then there will be increased pressure for quotas and an enforced solution,” he added. “Maybe the solution is to leave a limited time to companies to improve the situation on a voluntary basis with clear plans, and if that fails, quotas will be the only solutions. The prospect of having quotas should in itself be an incentive to address the issue.”
Broken talent pipeline
The retort to those calling for more gender diversity in senior management and on boards is that there is a lack of candidates. This argument is in itself an admission of failure, as the lack of candidates – if substantiated – is the result of acting on the pipeline. It is the company’s duty to make sure it will not come to a situation where there are not enough candidates and this can well be achieved by getting rid of bad habits, stereotypes, and positive specific action. “We have roughly 20% of boards where there are no women at all, and however you look at it, that is bad,” he said. He also pointed to the lack of fairness shown towards parents who choose to take parental leave. What is literally an existential necessity for our wider society is often penalised by businesses in terms of stalled career progression, missing out on bonuses, and other disincentives. And few companies promote parental leave for men, for instance.
“The reality is, that at entry level, there is a 50/50 female-to-male split in the financial sector, but something happens during these careers that can be fixed,” he said. Hence, he is keen to see businesses work to ensure that processes are in place to enable and encourage women to assume senior roles. According to the statistics bureau (STATEC) and the IGSS, there is a pay gap as well in financial services, which is not only unacceptable in our society but also bluntly illegal. There are still too many impediments that are preventing or discouraging women from reaching their full potential. Ultimately it is the organisation that will suffer if this talent is not given an environment in which it can flourish.
Collective fit and proper
Expertise diversity on boards is also imperative. Regarding IT expertise Mr. Marx asked: “How can digital transformation truly be part of strategic planning if the board or management lacks that knowledge first-hand?” Similarly with sustainability, which is another highly technical specialisation. Marx reminded that board members should not only individually be fit and proper, but that boards must also be collectively fit and proper. Hence an assessment should be made as to whether the board has the necessary range of expertise to be able to make the right strategic decisions. External expert input helps but may not be sufficient.
So far, Mr Marx has preferred the “soft power” approach, whereby he / the CSSF have used their position to advocate for change through interviews, meetings, speeches, and conferences. Given the little results, he doubts however that this will suffice. “We are definitely not seeing enough specific actions, and this is vital and urgent if a change is to happen. “For now we essentially see good intentions, for instance through corporate statements or adherence to charters, a necessary but insufficient step”.
Director General at Commission de Surveillance du Secteur Financier (CSSF)