Governance
The 'G' in ESG
The way companies are run matters
If companies are badly run, this can affect their profitability, making them a potential investment risk.
For instance, organisations which fail to keep proper track of their accounts can get into financial difficulty or even go bust, causing a loss of jobs and services that damage the wider community.
We also expect companies to respect the rights of investors by adhering to the highest market standards. This includes providing high-quality reporting disclosures and treating shareholders equally.
A lack of diversity on governing boards can lead to inward thinking that stifles innovation. Lack of robust oversight over senior posts can lead to unchallenged, poor, and sometimes costly, business decisions.
Some of these poor business decisions can also result in events that may damage our environment.
Guiding companies towards good governance
We help companies we invest in improve how they are run. This includes looking at the strength of their corporate strategies and the independence of the auditors who check the numbers. As a shareholder, we also use our voting rights to hold companies to account.
Spotlight on executive pay
Discussions around UK executive pay competitiveness have gathered pace, predominantly highlighting differences with pay practices and amount available in the US. Companies, investors, and various government bodies have weighed into the debate with often contrasting viewpoints. We believe that our pay principles and voting policies allow the necessary flexibility for effective discussion with companies’ remuneration committees in implementing the pay structures aligned to their companies’ strategies.
In 2024, we*:
- Voted on 174 remuneration policy resolutions at UK companies; of these, we supported 109.
- Voted against 86 (15.7%) of the 548 remuneration reports proposed at UK companies.
- Opposed the election of 62 remuneration committee members in the UK, due to our persistent concerns over their pay practices.
We continue to seek alignment between long-term performance and stakeholder experience. Globally, we opposed 50% of all management-proposed pay-related proposals in 2024, due to companies not meeting our minimum standards for fair and appropriate long-term performance-based pay.
Spotlight on AI governance
We believe artificial intelligence (AI) should drive long-term innovation, productivity, and value creation. To secure these gains, we believe investors must engage with companies and policymakers on baseline expectations for governance, risk management and transparency.
We published our initial expectations of companies on AI in 2023. In 2024, we continued to engage with the four largest US tech firms that are building AI systems as products: Alphabet†, Apple†, Meta† and Microsoft†.
Our expectations centre around: governance structures and board accountabilities; risk management, internal and external assessments, and risk mitigation; and the transparency of policies and processes around the uses of AI systems.
*All data based on our asset management business’s internal vote data, 2024.
† For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within our portfolios. The above information does not constitute a recommendation to buy or sell any security.
Find out more
Taking action
Find out how we've influenced companies to achieve better environmental, social and governance outcomes.
Environment
The action we are taking to protect the wellbeing of our planet.
Social
What we're doing to promote diversity and inclusion.
The value of your pension savings can go down as well as up and is not guaranteed.
Most of the activity described on this site is carried out by Legal & General's Asset Management who manages your funds and makes the day-to-day investment decisions.
All our funds are managed by professional fund managers but some of the funds available to you are not managed by Legal & General. External fund managers may take a different approach to responsible investing.
Throughout this site, we use companies as examples of the action we take. The issues highlighted are not exclusive to them.
Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an L&G portfolio. The information on this site does not constitute a recommendation to buy or sell any security.