LGIM pushes FTSE 250 boards to be more diverse
Legal & General Investment Management (LGIM), one of the largest investors in the UK stock market, has used its 2014 corporate governance report, published today, to encourage chairman of FTSE 250 organisations to appoint more female board members.
With good progress being made by FTSE 100 companies, where boards have almost doubled female representation over the last three years, LGIM has voiced the need for further commitment from the 101st to the 350th largest companies on the London Stock Exchange. The aspirational target of 25% female representation on UK boards by 2015 was laid out by Lord Davies in 2011.
As part of its efforts, LGIM wrote directly to the 26 FTSE 250 companies that have all-male boards (now 23) about the issue and interacted with the government and executive search firms to influence change. The company has also extended this focus beyond the UK for the first time, joining forces with other investors to send a letter to 56 companies in the United States where board diversity was deemed poor.
Elsewhere in today’s report, LGIM provides details of the 589 company meetings its corporate governance team had in 2014 and its focus on quality of management and succession planning. The tax policies of leading companies were an additional focus for LGIM’s engagement. The growing long term impact of climate change as a material risk to companies at a micro and macro level remains an engagement theme for LGIM into 2015.
LGIM notes that progress was made on pay issues in 2014, the first year that UK shareholders were given a binding vote on executive remuneration policy as well as the previously established advisory vote on the remuneration report. LGIM voted against remuneration issues more often in 2014, with 164 votes against compared with 120 in 2013, but this was due to this additional vote on the policy rather than deterioration in executive pay metrics. LGIM welcomed the simplification of remuneration structures and in particular the removal of share-matching plans. LGIM did not abstain on any vote in the UK in 2014.
Measures to tackle cyber-crime have been a particular priority for LGIM as a shareholder over the last few years, and it has identified five 'high impact' areas: data theft, day-to-day-operations, mergers and acquisitions, reputation and insider threat. LGIM believes it is clear that companies need to take more action and will continue to engage with companies throughout 2015.
The report also details the company's corporate governance activities across Japan, Europe, United States and the world's emerging market economies, where votes against board composition, remuneration and detailed consideration of shareholder proposals have influenced change at companies.
Sacha Sadan, Director of Corporate Governance at LGIM, said:
"Our aim is to help improve and align the assets in which we are invested. Being one of the largest investors in UK plc’s, we take this responsibility very seriously. We recognise and respect the trust afforded to us by our clients. We use our scale and influence to bring about real, positive and long-term change across world markets.
"Our role is to drive value of the companies we invest in. We want the best people in the right roles, focused on maximising shareholder value.
"Gender diversity remains a key issue in the boardroom of many corporates. There is no doubt that real progress has been made by our leading organisations and this is very much welcomed. At the FTSE 250 level however, more work needs to be done and we will continue to engage further with these companies. We will vote against the Chairman of companies where our engagements have been unsuccessful.”
The LGIM Corporate Governance Report 2014 is available on the LGIM website. ( Corporate Governance Report 2014 PDF: 1.55MB )
NOTES TO EDITORSLEGAL & GENERAL INVESTMENT MANAGEMENT:Legal & General Investment Management (LGIM) is one of Europe’s largest institutional asset managers and a major global investor. LGIM manages £736.8 billion in total assets for more than 3,000 clients*. Throughout the past 40 years we have built our business through understanding what matters most to our clients and transforming this insight into valuable, accessible investment products and solutions. We provide investment expertise across a full spectrum of asset classes including equities, fixed income, commercial property and cash. Our capabilities range from index-tracking and active strategies to liquidity management and liability-based risk management solutions. *As at 31 March 2015
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