Investors step up annual board vote threat on 30% female exec representation

UK companies are facing potential shareholder revolt over the number of women on their boards after large investors said they could abstain on director votes or even try and oust Chairmen of recalcitrant companies under their new powers of annual votes on director re-election.
The threat has become increasingly potent after the 30% Club, a group of chairmen and investors pushing for 30% of women on UK PLC boards, announced that four new institutional investors had signed up, including BlackRock, the world’s biggest asset manager. The other joiners are UK funds houses, Aberdeen, Hermes and the Local Authority Pension Fund Forum, which represents £100bn in assets for UK pension funds. The 30% Club said the new joiners took the level of investor assets backing the initiative to £1.7 trillion. Speaking at a London event organised by the 30% club, Sacha Sadan, Director of Corporate Governance at Legal & General Investment Management (LGIM), the biggest manager of UK institutional assets with £360bn under management, said it was pushing companies to adhere to the recommendations of Lord Davies, who in a government-backed report one year ago proposed that companies should have 25% of women directors by 2015. Currently, boards in the FTSE 100 index have an average of 15.2% (up from 12.5% in 2010) of women while among smaller companies in the FTSE 250 index, the level is lower at 9.6%, (up from 7.8% in 2010). The government has said it could legislate if companies don’t act voluntarily.Sadan said LGIM could, however, start to use its powers to vote out corporate chiefs at annual general meetings if there is no progress over a reasonable time period: “If we see no change after 3-4 years we will vote out the Chairman: that’s the stick we have as shareholders.” He noted that under the banner of board diversity LGIM was also looking at the nationalities and ages of directors as business critical issues.
Abigail Herron, corporate governance manager at The Co-operative Asset Management, said it was also incorporating gender into its voting policy based on Davies’ recommendations and would abstain from votes to re-elect the Chair of company nomination committees if the manager hadn’t seen measurable action on increasing female board representation. The Co-op said it was also looking for companies to join the 30% Club as a sign of commitment.
Baroness Hogg, chairman of the Financial Reporting Council, the UK corporate governance watchdog, said the UK government could help by recognising and promoting the power of shareholders to vote out directors annually if they didn’t move on diversity.
The 30% Club has drafted a letter that it is encouraging investors to send to companies requesting an official corporate statement on what companies are doing on board diversity. Helena Morrisey, Chief Executive Officer at Newton Investment Management, one of the original signatories to the 30% Club, said the threat of European Union quotas on women board levels should encourage UK companies to act and demonstrate the effectiveness of the country’s comply-and-explain governance regime. Link to 30% club