Does stewardship matter?
Corporate governance covers a broad remit of financial and extra-financial elements, from how a company is managed through to the rights of shareholders. We believe it’s about looking after the long-term interests of shareholders, by voting and engaging directly with the companies we invest in and ensuring that they have the right structure in place to manage their own risks and opportunities.
We’re also aware that individual shareholders lack the influence to ask difficult questions on how companies are impacting society, the economy and the environment. Therefore, we feel, the responsibility of institutional shareholders is to take this challenge to large companies on behalf of the individuals and clients they represent.
Legal & General Investment Management (LGIM) is a major investor in the UK and also a significant shareholder of equities and fixed income assets globally.
Asset Mix 2012
We are committed to using our position of influence to help improve board practices and performance in the markets in which we invest. This involves engagement with investee companies both directly and collaboratively with other institutional investors, the government and regulators.
In recent times, we have witnessed an increase in investor activity globally as demonstrated by shareholder proposals being put forward at general meetings. These proposals range from the removal of directors from the board and the appointment of shareholder nominees to calls for increased transparency on environmental and social issues. In addition, issues such as remuneration and the effectiveness of directors on boards are receiving much more public attention.
The topics outlined below highlight some of the key issues we engaged on during 2012 to protect shareholder value.
Research – does good governance create value for Investors?
We believe engaging on corporate governance and sustainability issues add value to companies' bottom-line. In order to demonstrate this point, we have been working with BITC for the last 3 years to links the companies' sustainability performance to the share price performance.
This is what we said in 2009 and 2010:
In 2012 and 2013 we continued to campaign and work with Business in the Community (BITC):
The research we published has showed that In 7 out of 11 years, FTSE-listed responsible businesses outperformed other businesses in total shareholder return.
In 2013 we have called for three very simple questions to be discussed by Chairman and CEO's and their Investors in meetings.
- An integrated approach to ESG (environmental social and governance) issues for their business
- Maximising opportunities for growth through diverse thinking
- Having a long term strategy aligned and communicated to their stakeholders