The way companies are run matters

If companies are badly run, this affects their profitability, which can make them an 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 which 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 such as huge oil spills.

 

What we’re doing for good governance

We work with companies to help improve how they are run, from the strength of their corporate strategies to the independence of the auditors checking the numbers. As shareholders, we also use our voting rights to hold companies to account, and are seeing our engagements contributing to positive outcomes such as:

  • In 2021 we engaged with more than 100 companies that we believe are not meeting expected standards on transparency in their corporate reporting, meaning investors are unable to properly assess investment risks and opportunities. For those companies that don’t improve, we will vote against the chair of the board
  • We continue to push for the separation of the CEO and board chair, and since 2020 we have voted against all attempts to combine the roles, voting against 390 director elections globally in 2021
  • We voted against the appointment of the lead independent director and nomination committee chair at Microsoft, which recently re-combined its chair and CEO roles, as the company did not engage in prior shareholder consultation despite previous years of positive engagement
Young diverse team meeting round an executive table

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 Investment Management (LGIM), a division of Legal & General. LGIM 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 LGIM portfolio. The information on this site does not constitute a recommendation to buy or sell any security.