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Update on LGIM voting policy on remuneration


Legal & General Investment Management (“LGIM”) has now published its 2020 Corporate Governance and Responsible Investment Policy, which includes a number of changes on how it will assess the executive remuneration policies of companies that it invests in.


Overall, the changes on remuneration matters for 2020 are relatively minor in comparison to those implemented in 2019, in response to the revised UK Corporate Governance Code and the IA’s updated Principles on Remuneration. Key changes on remuneration matters for 2020 include:


  • Performance metrics – LGIM no longer expects that the weighting of strategic/qualitative and personal objectives should be limited to a maximum of 25% of salary. Strategic/qualitative and personal objectives should be separated out with each having its own weighting and outcomes fully explained;

  • Restricted shares – for LGIM to support the adoption of restricted shares, companies no longer need to commit to disclosing annual bonus targets retrospectively;

  • In-post shareholding requirement – requirement should be set at a level that is equal to the total value of share-based variable pay e.g. for a bonus opportunity of 200% of salary, with 50% deferred into shares, and a long-term incentive opportunity of 250% of salary, the in-post shareholding requirement should be set at 350% of salary to be met within 5-years of appointment;

  • Post-exit shareholding requirement – any shares purchased by the executive director should not count towards the post-exit shareholding requirement. The post-exit shareholding requirement for an executive director of a FTSE100 company does not need to be set at 3x salary.

Mercer commentary: Changes to LGIM’s voting policy on remuneration have been relatively benign, with a few of the more controversial policies - such as the % weighting of personal/strategic objectives in the annual bonus and the prescriptive post-exit shareholding requirement for FTSE100 companies – being dropped for 2020.


The clarification that shares purchased by an executive director be excluded from the post-exit requirement is helpful and will likely be welcomed by companies, although it remains to be seen if other key stakeholders (e.g. the IA, ISS and other vocal institutional investors) adopt a similar perspective.


LGIM remains unchanged in its support of restricted shares. Despite a lack of new proposals for such schemes being put forward by September year‑end companies, we anticipate the prevalence of new proposals submitted in 2020 and 2021 to increase as company confidence in investor support, as well as the desire to simplify remuneration arrangements, continues to gather momentum.


LGIM’s voting policy on sustainability has been completely rewritten for 2020. Although the policy does not explicitly state an expectation for environmental, social and governance (“ESG”) measures to be adopted in incentives, it does include clear guidelines on ‘target-setting’ and adherence to greater transparency and disclosure. In addition, LGIM has added some factors to help companies address their employees’ views, including action plans distributed to staff, open feedback streams, employee engagement score, staff turnover and recurring themes from exit interviews relayed to the Board.


This briefing is for general guidance and does not necessarily cover all areas of the topics included in this briefing. It is not designed to give legal or other professional advice.

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