Excessive executive payouts and a lack of board diversity ranked among the top reasons Legal & General Investment Management (LGIM) voted against management proposals globally in 2022, according to its 12th annual Active Ownership report.

According to the $1.4-trillion fund manager’s Tuesday report, LGIM cast over 171,000 votes worldwide at 15,750 meetings in 2022, encouraging companies to enhance their ESG oversight and reporting.

Compensation

In 2022, LGIM warned it expected director pay raises to be “well below the average employee increases,” given the cost-of-living crisis.

Globally, the fund manager opposed 56% of all pay-related proposals “due to companies not meeting its minimum standards for fair and appropriate long-term performance-based pay.” 23 issuers were engaged with to discuss income inequality, with particular focus paid to the food retail sector.

Last year, LGIM also gave companies an “ultimatum” to disclose their living wage strategies by 2025. Companies that fail to do so will be subject to votes against their annual reports.

Diversity

2022 was the first year in which LGIM voted against FTSE 100 and S&P 500 companies due to a lack of board-level ethnic diversity. Eight portfolio companies were engaged on this basis with votes against applied to one company.

This year, LGIM revealed it will broaden this initiative to the FTSE 250 and Russell 1000 indices.

The fund manager also voted against 70 FTSE 100 and S&P 500 companies for having all-male executive committees, warning that this season it will expect all U.S. company boards to be made up of at least one-third women.

Climate change

In 2022, LGIM supported 77 of the 99 environmental shareholder proposals it voted on globally. Of the proposals supported, 57 were filed at North America-based companies, 12 in Japan, and three in the U.K.

The fund manager revealed it also voted against 32 of the 48 management “say on climate” plans put to a vote globally.

Reflecting the “improved practices and disclosures” provided by issuers, the number of companies subject to voting sanctions under LGIM’s Climate Impact Pledge fell by 35% from 2021.

The fund manager identified more than 100 companies as subject to voting sanctions for failing to meet minimum expectations related to a deforestation policy or program. LGIM warned voting sanctions will be applied in the 2023 proxy season for these companies.