The £1trn AUM asset manager’s Active Ownership report, published on Tuesday, revealed it voted against a record number of company directors last year, representing 3,864 companies globally – a 37% increase from 2017.
Gender diversity, audit issues and pay
During the year, it cast more than 100 votes against UK chairman on gender diversity, up from 31 in 2017 and just 13 in 2016.
It also announced that from 2020 it will vote against the largest 100 companies in the S&P 500 in the US and the S&P TSX in Canada, where there are currently less than 25% of women on boards.
Elsewhere, audit-related concerns played a big role in LGIM’s voting activity. The firm opposed a record number of global companies on their audit practices, voting against 326 in 2018 compared with 37 in 2016.
The firm has also strengthened its voting policies on pay, especially on pension provisions. Last year it voted against more than a third (35%) of pay packages globally and has vowed from 2020 to vote against the remuneration policy at UK companies that have not addressed the disparity in pensions between executive directors and the general workforce.
Writing in the report, LGIM director of corporate governance Sacha Sadan described last year as a “turning point” for for those who care about ESG issues.
He added: “There was, I believe, a shift in how asset managers approach ESG considerations, which the industry is now taking more seriously. Following high-profle failures in corporate stewardship – such as at Tesla, Carillion, GE and BHS – there is now even greater scrutiny from clients, regulators and governments.”
Walk the talk
Morningstar director of passive strategies and sustainability research Hortense Bioy said LGIM is clearly taking a tougher stance when it comes to holding companies accountable for their ESG credentials.
“The firm is sending a clear signal that it is expecting companies to raise their ESG standards faster than before,” she said. “The more systematic approach to voting against company management is evidence that LGIM’s band of tolerance has contracted in the last two years, especially on high-profile issues such as gender diversity and climate change.”
Bioy added: “LGIM has long been vocal about the importance of corporate governance. It is determined to walk the talk and show leadership in that area, especially in the context of passive management continuing to gain market share over active management. LGIM is one of the largest index managers in Europe.”
In March, Hermes’ voting proxy arm Equity Ownership Services published its 2018 annual report which revealed it engaged with 746 companies on 2,084 ESG, strategy, risk and communication issues and objectives.
On a global scale it recommended voting against or abstaining on 16,379 resolutions during 2018. In the UK, the asset manager engaged with 172 companies in 2018. Most engagements (46.6%) were on governance issues, with 19% on environmental, 18.5% on social and ethical, and 15.9% on strategy, risk and communication.