One of the world’s largest fund managers, Legal & General Investment Management, has warned companies it will take action if they fail to show good corporate practice during the coronavirus crisis.
The UK’s largest asset manager, which has more than £1.1tn in assets, is set to take a tough stance against company directors who mistreat employees and suppliers during the pandemic, after opposing the re-election of 4,000 directors at annual meetings last year.
“I worry that the industry could fall short at this juncture,” said Sacha Sadan, LGIM’s director of investment stewardship. “We make constructive recommendations to improve the entire financial system for our clients.”
The nationwide coronavirus lockdown has shut swathes of the economy, from the high street to the travel industry, financially crippling businesses across the UK.
How businesses react, such as directors sacrificing salaries and bonuses and staff being treated fairly, will be put under the spotlight when corporations face investors at annual meetings.
LGIM’s ninth annual “active ownership” report, which charts the action it took against companies over environmental, social and governance issues (ESG) last year, shows the company opposed 35% of pay packages globally. And in the UK, LGIM voted against 17 chairs of remuneration committees at companies in which it holds a stake on behalf of clients.
“The industry needs to show investors and regulators what it has achieved on ESG issues, not what it thinks is important,” said Sadan. “I hope this ninth report demonstrates how serious we at LGIM are about all these issues and the actions we take on them.”
LGIM said climate change was the leading topic of engagement it had with companies last year.
The company said it took sanctions against 11 companies named as “laggards” for failing to take sufficient action on climate change, including ExxonMobil.
During 2019, LGIM said it most frequently engaged with companies including BP, Ford, Shell, HSBC and Amazon.
As well as the response to coronavirus, LGIM said it planned to focus on key corporate governance areas such as diversity, employee pay and data privacy.
“Everyone has a policy on diversity – but what have they actually done?,” said Sadan. “We also plan to focus on financial inequality, from executive pensions to the living wage and gender pay gap. Other areas we are going to look at include privacy and security, not least what companies do with their customers’ data.”