LGIM closes executive pay response after finding it mostly ignored

General Legal and Investment Management, the UK’s largest asset manager, will discontinue most direct responses to companies regarding their executive salaries, after finding that the responses Their feedback was ignored most of the time.

The £1.33 billion wealth manager outlined the change in approach in its annual letter to remuneration committee chairmen, which the company is in the process of sending to all 600 workers. company in the FTSE All-Share index.

“Most companies don’t act on the compensation feedback we give them,” Angeli Benham, senior global ESG director at LGIM, said in an interview. “For example, they wrote to us saying they would increase the CEO bonus from 150% salary to 200% salary. Our feedback would say that LGIM can’t support that, but they do it anyway. ”

She added: “Often we are the exception among shareholders with a stricter stance on bonus increases, because we do not support them. Companies tend to do what is right for management rather than listen to us from a shareholder.”

Over the past decade, LGIM has responded to companies consulting with property managers about proposed changes to executive pay. However, it found that for about 80 percent of the proposed changes, “the answers covered in our policy document are detailed and instructive,” Benham said.

From now on, LGIM will direct remuneration consultations to its policy document and respond only to matters considered special, such as in relation to its discretionary application or where the government is concerned. unusual or not mentioned in the policy document.

“Though we still think it’s important to give companies feedback on changes to their executive pay. . . Our time is better spent educating the market on areas like income inequality and climate change, says Benham.

LGIM voted against 37.5% of new pay policies in the UK in 2020 and earlier this year said it would take line is even more difficult pay wages in 2021, post-pandemic. In particular, they are looking to ensure that companies that have collected a lot of money or cut dividends do not pay bonuses.

Earlier this year, it voted against pay-and-reward plans at Cineworld, the Hollywood Bowl and Future, the magazine publisher. The wealth manager’s 2021 votes on salary have yet to be announced.

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The letter to compensation committee chairmen also encourages companies to offer free stock to all employees, to motivate them and allow them to share in their employer’s success.

Schroders, the £717billion asset manager, has launched an initiative to split all of its approximately 5,500 employees 5% of their salary in shares.

Schroders CEO Peter Harrison told the Financial Times: “We wanted to create a deeper sense of partnership and belonging among everyone.” “The move has been “extraordinarily received” internally, he said.

Meanwhile, LGIM is requiring all companies to pay their employees a real living wage, which is £9.50 an hour nationally and £10.75 in London.

“We wanted them to focus on their employees rather than their executives,” said Karoline Herms, Senior Global ESG Manager at LGIM. “Many working employees are struggling to make ends meet, juggling between putting food on the table and heating their homes. This can have lasting effects on their health and productivity. “

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