Why Legal & General is trying to slay the chair and CEO role
![](https://www.cityam.com/wp-content/uploads/2020/02/1154919768.jpg?w=742)
Blackrock’s Larry Fink is a big fan of using shareholder muscle to influence corporate culture.
From climate change to “profit with purpose” he’s vowed to exercise his fund’s substantial clout in pursuit of “sound corporate governance” and “an unwavering focus on long-term sustainability”.
Fink’s eyebrows may have risen a little, then, upon discovering that fellow fund house Legal & General Investment Management (LGIM) plans to wade into one of the thorniest areas of corporate governance: joint chair and chief executive (CEO) roles.
LGIM announced yesterday that starting this year it would vote against the re-election of all combined chair-CEOs, with the fund’s director of investment stewardship, Sacha Sada, saying that splitting the roles will provide “a better balance of authority and responsibility.”
Sada added that the reform is necessary for “the best long-term interests of companies and investors,” and that the fund’s position was “not personal.”
Fink may take a view on that. Not only does he hold the chair and CEO positions at Blackrock but LGIM is a top 25 shareholder in the company.
JP Morgan, Amazon and Facebook also look set to be in LGIM’s sights along with hundreds of companies in the US and Europe where the joint chair-CEO role is common.
Meanwhile, the structure is rare in the UK where the corporate governance code takes a pretty dim view of combining the two positions. According to the Financial Reporting Council’s (FRC) latest review of compliance with the code, there are just 12 companies in the FTSE 350 with one individual as both chair and CEO.
Eight of these cases were identified as temporary arrangements (where either the chair or CEO seat had become vacant sooner than expected) while four companies employed the device long-term.
Of those four, two companies provided the FRC with evidence of mitigation, such as additional oversight. LGIM has over £1 trillion under management so its firepower is not inconsiderable and the move marks a welcome continuation in the trend of fund managers taking a more activist stance.
While different jurisdictions and corporate cultures take different views on the wisdom of combining the two top roles, LGIM has picked a worthy fight and we shall watch its endeavour with interest.