Letter from the Chairman.

Letter from the Chairman.
John Stewart, Chairman Board of Directors (photo)
“A sound governance framework supports us in our decision making process. We as a Board keep at the heart of our considerations the interests of the Group’s shareholders, customers and other stakeholders.”
JOHN STEWART, CHAIRMAN

CHAIRMAN’S LETTER

This year has been an excellent year of growth for the Group. As we continue to focus on accelerating our growth, our governance framework must evolve with us. A sound governance framework supports us in our decision making process and ensures a balanced outcome for all of our stakeholders.

The Board is responsible for ensuring that our governance across the Group is strong, clear and robust. With a focus on organic growth and selective acquisitions, our governance must be of the highest standard in order to meet the Group’s changing needs and in addition to respond to regulatory change. As Chairman, it is essential that I ensure that we, as a Board, are prepared for new developments. Accordingly, we regularly review our governance framework and compliance with the UK Corporate Governance Code. I am pleased to report that the company has complied with all principles of the Code throughout the year ended 31 December 2013.

ROLE OF THE BOARD

The Board is accountable for the long term success of the company, for setting the strategic aims of the Group and its risk appetite, and is responsible for ensuring that the Group is appropriately resourced to achieve its strategic goals. The Board also sets the tone for the Group’s culture, values and ethical behaviours and we keep at the heart of our considerations the interests of the Group’s shareholders, customers and other stakeholders.

BOARD CHANGES AND DIVERSITY

There have been a number of changes to our Board during the year; the retirements of three of our non-executive directors, the appointment of Mark Gregory as group chief financial officer and the appointments of Lizabeth Zlatkus and Lindsay Tomlinson as non-executive directors. When making these changes, the Board has remained conscious of the need to maintain a well balanced and diverse Board to ensure we continue to operate as effectively as possible.

In monitoring our Board composition we continue to consider not only the balance of skills and experience required but also how we can ensure that we have a diverse Board in terms of thought, background, experience and gender. Although we do not have a set target in respect of the number of women on our Board, we endorse Lord Davies’ recommendations and continue to incorporate board diversity considerations into our thinking on the composition of the Board. As a company, we believe that a diverse workforce is essential to the success of our business and the work of the Equality, Diversity and Inclusion Committee supports us in achieving this goal. We have developed a next generation women programme with the Bank of England and many other FTSE 100 companies and I am pleased to be involved in the FTSE 100 Cross-Company Mentoring Programme and the 30% Club, which is committed to bringing more women on to UK corporate boards.

We are also strong believers in developing the pipeline of talent from within our organisation. I was extremely pleased that we were able to appoint Mark Gregory as the Group’s chief financial officer. Mark previously acted as chief executive of the Savings business and has served on the Board since 2009. I believe that Mark’s appointment as CFO is testament to our commitment to developing talent within the Group.

Henry Staunton, previously senior independent director, vice chairman and Chair of the Audit Committee, retired in May after serving on the Board for nine years. Dame Clara Furse stepped down from the Board in May after four years of service to take up a position at the Financial Policy Committee and Nick Prettejohn stepped down in June after two years of service in order to join the Prudential Regulation Authority as a non-executive director. I am extremely grateful to Henry, Clara and Nick for their excellent contributions. Henry’s commitment and wisdom over his nine years of service were greatly valued and I’m pleased that both Clara and Nick have gone on to pursue senior positions in financial services regulation and policy making.

Following these retirements I was very pleased to welcome Lindsay Tomlinson and Lizabeth Zlatkus as non-executive directors, both of whom are valuable additions to our Board. Lindsay brings us a wealth of experience from his time in the investment management industry and his non-executive roles, while Lizabeth’s insurance and international experience will be a great addition to us as we continue to pursue our strategy.

The Nominations Committee report sets out in further detail the Board changes that have taken place during the year and our policy on diversity.

FOCUS ON STRATEGY

The Board dedicates a considerable part of its time to considering the Group’s future strategy in light of the previous year’s performance against set targets, the continuing challenges that face the UK and global economies and financial services companies, and the opportunities for growth. A two day strategy event was held in 2013 at which the Board considered the Group’s strategy with a focus on international growth of LGIM; direct investments and infrastructure; digital solutions and expansion of retirement solutions. The discussions were constructive and thought provoking and an excellent basis from which to build the Group’s strategic direction.

OVERSEAS VISIT

The Board has in place a programme of site visits, both domestic and international, and this year I was extremely pleased that the Board held its first overseas Board meeting at the Legal & General America (“LGA”) office. The visit provided the Board with an excellent opportunity to meet the Board members of LGA and key members of the management teams of both LGA and Legal & General Investment Management America. We found this to be a highly beneficial trip and we hope that we can replicate this success in future years.

EXECUTIVE REMUNERATION

This year, we have seen the implementation of a number of changes to the narrative reporting regime, in particular the way in which we disclose and report on executive remuneration. As in 2012, you will see that the remuneration report includes both a forward looking section outlining the Group’s remuneration policy and a section reporting on implementation. The Group’s remuneration policy is now subject to a binding shareholder vote at the company’s 2014 AGM. In preparation for these changes, the Remuneration Committee has spent a great deal of time considering the policy and consulting with shareholders.

COMMUNICATIONS WITH SHAREHOLDERS AND AGM

We welcome the opportunity to communicate with all of our shareholders; both our institutional investors, some of whom we have met with during the year, and our retail investors. The AGM provides a valuable opportunity for all of our shareholders to hear more about how we have performed during the year and to meet with our Board in person. I look forward to sharing with you the successes of the company during 2013 and would encourage as many shareholders as possible to attend the AGM on 21 May 2014.

Signature John Stewart, Chairman (handwriting)

John Stewart
Chairman

For more information visit our website: investor.legalandgeneral.com/corporate-governance.cfm

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