Monday 3 February 2020 10:40 am

Investment giant Legal & General to vote against combined chair and chief executive roles

Legal & General’s investment arm will vote against combined chief executive and board chairman roles globally, taking on business giants including Facebook’s Mark Zuckerberg and Blackrock’s Larry Fink.

Legal & General Investment Management (LGIM), one of the largest investment companies in the world with over £1 trillion under management, announced the change as part of an annual review of its voting policies. 

Read More: Chairs of public companies think they would be ‘better off’ at private firms

The  change is likely to particularly impact companies in the US, France and Spain, where combined executive roles are common. 

Some 47 per cent of S&P 500 boards have combined chair and chief executive roles. In Spain, 20 per cent of IBEX 35 companies have the same, compared to 53 per cent of France’s CAC 40 companies.

The separation of the chief executive and board roles provides a better balance of authority and responsibility over time, said LGIM director of investment stewardship Sacha Sadan.

“We’ve also seen a worrying trend of companies splitting the roles after a scandal, then recombining over time,” he added. 

“We hope that by escalating this policy, we are sending a very clear message that we will not support a combined role going forward.”

LGIM also announced today that it would vote against all Topix 100 companies in Japan that do not have at least one woman on their board. 

Sign up to City A.M.’s Midday Update newsletter, delivered to your inbox every lunchtime

The proportion of female board members on Topix 100 firms is significantly lower than in other developed markets, LGIM said. 

In 2019, the percentage of female board members on the index rose above ten per cent for the first time, compared to 30 per cent of FTSE 350 board members and 27 per cent on the S&P 500.

Last year, Legal & General introduced a policy of voting against FTSE 350 firms with less than 25 per cent of women on the board, and voting against all-male boards globally. 

Read More: £30bn pension pool slams financial system as ‘not fit for purpose’ on climate change

The investment house will now also vote against the largest 100 companies in the S&P 500 and S&P TSK with less than 25 per cent female board members. 

“Well-functioning, independent boards are key to long-term investment performance. As stewards of our clients’ capital, we want to ensure we are holding companies to high standards, and that we speak with one voice in encouraging markets to align with global best practices,” said Sadan.