Revealed: the fund manager that spearheaded shareholder spring

Legal & General has led attempts to rein in malpractice on behalf of ordinary investors

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The Independent Online

Legal & General has emerged as the leader of the "shareholder spring" which saw an unprecedented number of companies held to account for poor practice on issues such as bosses pay, an investigation by The Independent has revealed.

Between April and June L&G Investment Management, which holds around 4 per cent of the UK stock market, opposed management resolutions at 76 different companies, more than half the already high total of 125 "no" votes for the whole of 2011.

By June the fund manager's corporate governance unit was voting against management resolutions at the rate of one out of every three annual meetings.

Amid calls for City institutions to exercise greater stewardship over the companies in which they invest on behalf of ordinary savers, L&G's activism stands in contrast to more traditionally minded fund managers such as the Prudential-owned M&G or the US fund manager Fidelity. An analysis of their voting records uncovered 24 votes against management in the case of M&G during the same three-month period. That total includes a number of abstentions in addition to fully fledged "no" votes. Fidelity managed 26.

Our analysis included votes against the re-election of particular directors as well as those on more technical matters such as waivers of existing shareholders' "pre-emption" rights which give them first refusal to buy new shares. A vote against a company's management on a technical matter still arguably demonstrates that a fund manager is exercising stewardship over the companies in which it invests.

Governance experts have been frustrated that the tough approach adopted by fund managers such as L&G – it voted against in 17 of the 25 biggest shareholder rebellions over pay during the three-month period – is not being reflected across the City of London. The Independent's research suggests that is indeed the case.

One governance professional said: "The problem is that some fund managers just aren't taking their responsibilities seriously enough. It's very frustrating because better-governed companies tend to be better-run companies that result in better returns for shareholders in the long term."

L&G has even been willing to vote against other insurers, including Resolution, Aviva, and Chesnara, and other fund managers, such as F&C.

Sacha Sadan, its director of corporate governance, said: "We have absolutely no problem with executives at good companies getting paid well. What is important to us is that pay is linked to performance and that pay packages are simple enough to understand."

Fidelity defended its record, saying: "The focus should be on outcomes rather than votes. We have recently changed our voting policies towards incentive schemes and have publicly criticised companies when we felt that rewards were out of alignment with shareholders' interests. In July we wrote to over 400 chief executives advocating a shift towards career shares and longer holding periods for equity awards."

An M&G spokesman said: "When we vote at a company's AGM we take a keen interest in how the company has been performing for shareholders."

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