Letter from the Chairman
Good corporate governance is not just about following the rules and regulations. It is about how we conduct ourselves as a Board, our culture, behaviours and how we do business. In today’s environment, it is evident that good governance makes sense; for us as a business and for our customers, shareholders and the wider community.”John Stewart, Chairman
In recent years, corporate governance best practice has continued to evolve, most recently with the publication of the September 2014 edition of the UK Corporate Governance Code (‘the Code’). Our business has evolved too as we continue to pursue our strategic objectives and respond to the changing regulatory environment and market uncertainty. As Chairman, it is my role to ensure that our internal governance framework keeps pace and that it remains strong and balanced in order to support the growth of the business.
This year, we have continued to develop our governance practices and embed the delegated authority framework which we implemented last year. This has resulted in more robust decision making processes and a stronger and clearer governance framework. We have once again reviewed our approach to governance and compliance with the provisions of the Code. For the year ended 31 December 2014, the September 2012 edition of the Code remained the standard against which we were required to measure ourselves. I am pleased to report that we have complied with all principles of the Code throughout the year ended 31 December 2014. In 2015, we expect to be fully compliant with all provisions of the September 2014 Code.
Board appointments and succession
A strong governance framework alone is not enough to deliver our strategy. This framework needs to be managed by an effective Board that sets the tone for the group’s culture, values and ethical behaviours.
Our Board has continued to evolve in 2014. In particular, we have seen a number of non-executive director changes; Mike Fairey retired from the Board at the conclusion of the 2014 AGM in May, Olaf Swantee joined us as a non-executive director on 1 August 2014 and, most recently, we announced the appointments of Richard Meddings and Carolyn Bradley who joined the Board as non-executive directors on 1 December and 8 December respectively. We will also see change to the executive make up of our Board with John Pollock retiring from his role as a director and chief executive officer, Legal & General Assurance Society at the 2015 AGM. John’s career has spanned over thirty years at Legal & General and I am extremely grateful for the excellent contribution he has made and continues to make to the Board and to Legal & General more broadly.
We have always remained conscious of the need to maintain a well balanced and diverse Board and we believe that our Board has a strong mix of individuals in terms of thought, background, experience and gender. Taking gender in particular, although we do not have a set target in respect of the number of women on our Board, we incorporate all types of diversity considerations into our thinking on the composition of the Board. We are strong believers in ensuring that we ‘get the right person for the job’ and that this has to be based on merit above all else.
These considerations do of course go beyond Board level and the Board remains committed to developing the pipeline of talent from within the business. The Board is regularly updated on the progress that is being made and we have a full suite of development programmes to continue to support the development of the leadership pipeline. The Legal & General 50/50 by 2020 Network, in particular, demonstrates our commitment to gender equality and making us a more diverse workplace. I am also pleased to continue to support the 30% Club and the encouraging progress that has been made in bringing more women on to FTSE 100 boards.
The Nominations Committee report sets out in further detail the Board changes that have taken place during the year.
As well as a strong governance framework and an effective Board, we also recognise the role our investors play in supporting the company; open, constructive and effective communication is of considerable importance to us.
Continual engagement provides our investors with an opportunity to discuss particular areas of interest and to raise any concerns. This year we have met with a number of institutional shareholders and during the early part of the year the Remuneration Committee welcomed the opportunity to consult with shareholders on our executive remuneration policy, which was put to shareholders for approval at the 2014 AGM. We believe this engagement was constructive for both us and the institutions involved and provided us with the opportunity to respond to feedback, which we believe is an important part of a two-way engagement process.
We also place great value on the engagement we have with our retail shareholders and in September Mark Gregory, chief financial officer, hosted a UK Shareholders’ Association event at our head office in London. This was a well-attended event and an excellent opportunity for some of our retail shareholders to be updated on our strategy, governance and performance during the first half of the year.
The AGM also provides an effective communication forum and an opportunity for our shareholders to meet with Board members in person. I look forward to sharing with you our successes during 2014 and would encourage as many shareholders as possible to attend the AGM on 21 May 2015.
As the economic and regulatory environments continue to change, governance best practice and guidance will continue to emerge. Our investment management business, as one of the largest institutional asset managers in Europe, has a key role to play in shaping the environment and leading governance best practice and is fully supportive of the principles of the UK Stewardship Code. By voting responsibly and engaging directly with companies, the LGIM governance team promotes best management practice thereby driving standards up. We are very supportive of the work carried out by LGIM and their commitment to the UK Stewardship Code and will continue to ensure that we, as a company, strive towards the highest standards and monitor and respond to new developments as they emerge.