Legal & General Investment champions shareholder power

by Gill Montia

Story link: Legal & General Investment champions shareholder power

Legal & General Investment Management (LGIM) is adding to the debate over regulation by defending shareholders.

The Treasury Select Committee’s examination of the credit crisis earlier this year called institutional shareholders to account for not having done enough to challenge banks’ boards in the run-up to the credit crisis.

LGIM is the biggest investor in the UK stock market and the firm’s head of equities, Mark Burgess, has made it clear that he believes the lion’s share of the blame for the near collapse of the UK banking sector lies with regulators.

He illustrates his point with regulatory failures over Royal Bank of Scotland’s (RBS’s) fateful acquisition of ABN Ambro, which helped push the bank to the brink of collapsed.

The LGIM executive is now calling for the annual re-election of all directors and other measures that would boost shareholder power.

Mr Burgess’ remarks come shortly after Chancellor of the Exchequer Alistair Darling came out in favour of the UK’s current tripartite system of regulation and blamed banks’ boards for the financial crisis, when making his Mansion House speech.

Mr Burgess’ frustration can be understood because LGIM was unsuccessful in demanding the resignations of both RBS’s chairman and chief executive as early as May 2008.

The demand came during meetings with members of RBS’s board shortly after the bank had announced a £12 billion rights issue.

As a major investor in RBS, LGIM had been led to understand that the bank had no need to raise capital and once the rights issue was announced the firm asserted that Sir Tom McKillop and Sir Fred Goodwin’s positions were untenable.