Greater board diversity promotes long-term company value, says Legal & General Investment Management (LGIM)
30 November 2011
In today's Fundamentals briefing, Legal & General Investment Management's (LGIM) new Director of Corporate Governance, Sacha Sadan, explained why the diversity of a board of directors is crucial to a company's long-term performance.
"For a business to make the best decisions possible, the best quality information is required alongside rigorous debate. This rigour is only achieved through a diverse board whose members offer truly fresh insights from a variety of perspectives". Sacha explained.
While much of the debate surrounding diversity has focused on gender, Sacha highlighted a number of other important issues, including the age, nationality and breadth and range of experience of the board. "Most surveys show the average age of a director in the UK being well into the late 50s while board chairmen are likely to be closer to their mid 60s. If a board's experience and views are not aligned to the changing behaviours of their customers, then there is an increased risk of missing potentially significant growth opportunities and of losing overall market share. For example, not recognising the impact of new technologies that may be more rapidly adopted by younger generations".
LGIM believes 'diversity' is not just about protecting a business from risks, but equally about identifying and capturing opportunities. Sacha argued that a diverse board has greater potential to attract high quality employees from a far wider range of fields and backgrounds and explained how LGIM has worked closely with recruiters to help encourage diversity from the very core of a company.
As one of the UK's largest investors, LGIM has been highly active in challenging the composition of boards. According to Sacha, "So far in 2011 we've engaged with more than 200 companies regarding corporate governance and the role of 'board diversity' has been raised at the majority of these meetings. Most promisingly, in all cases the discussions have been welcomed by the companies, who recognise that further progress in this respect will only strengthen their business over time".
Notes to editors
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About Legal & General
Legal & General Investment Management Limited.
One Coleman Street
London EC2R 5AA.
Registered in England 2091894.
t: +44(0) 20 3124 2096