L&G wants shareholder power

Legal and General has demanded changes to the way shareholders and boards work together to give shareholder more clout to prevent future RBS-style disasters.

The proposals are:

• Annual re-election of board directors at general meetings to strengthen accountability.
• Greater challenge on the board from non-executive directors including deeper probing into a company’s affairs.
• Non-executive directors receiving more independent support from the company secretary for information and training requirements.
• An external performance evaluation to be conducted with a full audit report disclosed in the annual report and accounts.
• An ‘Investment Forum’ where key shareholders can come together to voice their views and address any potential issues facing a company.
• Remuneration arrangements throughout the organisation to be considered by the board and linked to risk management.
• International regulation and corporate governance standards in regulated industries to be consistent.

Mark Burgess, head of equities and L&G Investment Management, said: “Recent events have demonstrated that all shareholders need to themselves take the issue of Corporate Governance seriously. In addition Company Boards need to listen, perhaps more than they did in the past, to the wishes of their shareholders. The proposals that I have outlined today, I believe will help in a very practical way with both these issues.”

Influential company

The Times added that LGIM owns about 4.5% of every listed company through its tracker funds. It could own a further 5 to 10% through its active funds.

Burgess claimed that companies were adopting a “divide and rule” tactic when dealing with their investors. “We have been told more times than I would care to mention that ‘you’re on your own here’,” In turn, shareholders were talking to each other as never before, he said. Being able to combine their efforts without fear of breaching stock market rules could help to force change more quickly. “There needs to be a forum where institutional shareholders can get together and collectively engage with companies,” Burgess said.

Objections raised

LGIM met 640 companies last year, about 130 of those to raise corporate governance concerns. It will not oppose cash windfalls for Barclays executives, including £22m for Bob Diamond, the president, after the sale of Barclays Global Investors.

LGIM objects to Sir Stuart Rose’s combined role as chairman and chief executive at Marks & Spencer.

RBS fiasco

The Telegraph aded: Speaking about Royal Bank of Scotland's acquisition of ABN Amro, he said: "We went to see the previous, previous chairman [Sir George Mathewson] and said we thought performance was being inhibited by [former chief executive] [Sir] Fred Goodwin wanting to do M&A all the time. We told [former chairman] Tom McKillop M&A would be unwelcome. If I regret anything, I regret voting in favour [of the ABN deal]. We shouldn't have supported the management."