Major UK pension fund Legal & General Investment Management (LGIM) has warned it may vote against directors responsible for boardroom appointments if they do not take steps to increase gender and cultural diversity.
Sacha Sadan, director of corporate governance at the fund, one of the biggest investors in bluechip UK firms, said a vote against the chairman of a nominations committee could be a possibility if they fail to respond to less forceful encouragement to increase boardroom diversity.
“We might in the future. If a company does nothing for three years, we would ask why that this is the case,” the Guardian quotes Mr Sadan as saying.
LGIM has recently been meeting with the companies it invests in to encourage them to address issues of diversity in high level appointments and most firms have been receptive to such suggestions.
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“Most promisingly, in all cases the discussions have been welcomed by the companies, who recognise that further progress in this respect will only strengthen their business over time,” said Mr Sadan.
“It doesn’t normally get to the vote … it is better to come to an amicable solution.”
Much focus has been placed on increasing the representation of women on boards of UK firms in recent months following the publication of the Lord Davies Review in February, which set companies the goal of 25 per cent female board membership by 2015.
However, LGIM also wants to see other aspects of diversity addressed, such as age, nationality and breadth and range of experience.
It believes this will help companies to be more in tune with their customers and therefore more competitive.
“If a board’s experience and views are not aligned to the changing behaviours of their customers, then there is an increased risk of missing potentially significant growth opportunities and of losing overall market share,” said Mr Sadan.
“For example, not recognising the impact of new technologies that may be more rapidly adopted by younger generations.”
