LGIM increases pressure on firms with too few female board members

Legal & General Investment Management voted against more than 100 chairmen last year for failing to boost the number of women in their boardrooms.

Companies including Barclays, Ted Baker and Sports Direct were targeted by the fund manager last year; in 2017 it only voted against 37 UK chairmen.

LGIM has been voting against all-male boards of the S&P 500 companies since 2017. Last year it included Russell 3000 constituents and also began to vote on the issue globally.

From 2020, it will start to vote against the largest 100 companies in the S&P 500 and S&P/TSX – two major indices in US and Canada – where there are less than 25% women on the board.

Another reason for the increase in companies it has voted against is down to a strengthening of its policies in 2018. It will now automatically vote against UK companies with less than 25% female representation at board level, and companies globally with no women on their boards, those with unexplained boosts to executive pay or bonuses above what is offered to the general workforce and over-boarded directors, defined as those who hold more than five simultaneous directorships. There are concerns that many companies are drawing from the same small pool of female non-executive directors rather than actively addressing the diversity issue.

LGIM says it believes its actions are having an impact, citing a fall in the number of all-male, FTSE 250 boards to an all-time low of five at the end of 2018 (this has since fallen to two). Moreover, the percentage of women on Russell 3000 boards has increased for four straight quarters. Nevertheless, 504 boards are reported to have no female directors.

Last year LGIM also publicly released its diversity scores, which it uses to rank around 350 of the largest UK companies according to their levels of gender diversity. The LGIM Gender Diversity Score takes into account the percentage of women on a company’s board, in the executive team, in senior management and in the overall workforce. It also launched the first gender-oriented fund to focus exclusively on UK listed companies.

L&G Future World Gender in Leadership UK Index Fund is aimed at raising gender diversity standards in companies across the UK equity market by allocating more to companies that have achieved higher levels of gender diversity.

LGIM says it is against quotas, favouring targets for gender diversity instead. It believes quotas “may lead to tokenism, without an effective commitment to the pipeline of women executives”.

The figures are published in LGIM’s Active Ownership Corporate governance report which also highlights what it calls an emerging trend that the board tenures of women tend to be shorter than those of men, whether in a non-executive or executive role.

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