Legal & General Investment Managers voted against a record number of global companies in 2018, according to its latest annual Active Ownership report.
This report sets out details of LGIM’s stewardship and ESG credentials. Publishing this report the asset manager – one of the largest in the UK – says it believes climate change, board effectiveness and renumeration continue to drive its programme of engagement, both in the UK and overseas.
In the UK there was a renewed focus on diversity issues and audit related issues. Executive pension contributions also became a more prominent area of engagement.
In total LGIM voted against 3,864 company directors. This is a 37 per cent increase from 2017, with LGIM stating it has strengthened its voting policies last year. More than half of these votes (52 per cent) were at companies now based outside the UK.
LGIM’s director of corporate governance Sacha Sadan says: “2018 was a year of record client demand for our work as we continued to engage with companies and regulators on a broad range of issues, using our voting power to influence change.
“The increased figures reflect the higher standards we expect companies to adhere to, having strengthened our own voting policy in 2018.
“We are encouraged by much progress being made but there remains more to be done and real success will be dependent on collaboration – companies need to create long-term sustainable business models and deliver value for investors.”
According to the report, diversity related issues, audit, pension remuneration, board effectiveness and climate change were key areas of engagement and issues where LGIM has introduced new initiatives to influence change.
LGIM voted against the largest number of UK chairs to date in 2018 on the issue of gender diversity, with over 100 votes cast, up from 13 in 2016. This report also shows LGIM has voted against all-male boards of S&P 500 companies since 2017 and now also does so globally.
It has also announced that from 2020 it will vote against the largest 100 companies in the S&P 500 and S&P TSX – two major indices in the US and Canada, where there are currently less than 25 percent of women on boards.
In light of ongoing concerns around the quality, independence and regulation of auditors, and following a number of high-profile accounting scandals, LGIM voted against a record number of companies on audit-related concerns – it voted against 326 companies globally, compared to 37 in 2016.
LGIM also set out details on how it will take a tougher stance on executive pensions.
In 2016, LGIM asked companies to align their executive pensions with that of their workforce. It says the number of companies that subsequently amended their policy on executive pensions were few and many of those that did, did not make sufficient reductions.
Therefore, from 2020, LGIM has said it will be voting against the remuneration policy at UK companies where they have not addressed the disparity in pensions between executive directors and their general workforce. It will expect pension contributions for any new hires to the board to be aligned with what is offered to the general workforce and has also asked board chairs to address the pension provisions of existing directors.
LGIM has said that executive remuneration continues to be a key area of engagement. In 2018, LGIM voted against more than a third (35 percent) of pay packages globally, largely due to the lack of performance conditions underpinning executive pay. Last year, LGIM called for a curb in gradual increases in bonuses driven by short-term operational objectives and in 2018 voted against 105 US companies due to an insufficient performance period.
An ongoing engagement priority, climate change considerations are also increasingly factored into capital allocation decisions. Over the course of 2018, LGIM launched 14 funds with environmental, social and governance objectives under the Future World fund range.
As part of its Climate Impact Pledge, in 2018, LGIM announced that it will not hold eight large global companies in the Future World funds. Where such companies are seen to take insufficient actions on climate risks, LGIM will also vote against the chairs of their boards, across the entire equity holdings.