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[February 10, 2014]
L&G's corporate governance crusader is in it for the money
(City A.M. (UK) Via Acquire Media NewsEdge) AS FAR as some chief executives are concerned, Sacha Sadan is the enemy within. He's dressed like them and speaks like them, but in focusing on corporate governance in public companies, some feel he's in danger of pushing them into jobs in less-scrutinised roles in hedge funds or private equity.
Some can't bear what they perceive as an obsessive interest in executive pay and a box-ticking attitude to the way in which they run their firms. And many think that if the likes of Sadan continue to grow their influence, many of their peers will decide that working in a public company isn't worth the candle.
Sadan, a former fund manager who now heads up corporate governance at Legal & General Investment Management (LGIM), couldn't disagree more. "We're living in a capitalist world and we want companies to make money. This is ¦ not about adding rules or red tape. We just want to make sure the rules work," he says.
Sadan explains that where once corporate governance experts were perceived to have focused on executive pay, now there's a whole range of issues they look at as part of their role as "active and long-term owners of companies".
"A lot of what we look at is common sense," he points out. "Asking companies to rotate their auditors every 20 years or so isn't draconian.
"We're pushing diversity extremely hard because we want different skills on boards for future success." But of course Sadan accepts that the pay issues often make the biggest headlines, as they may well do again in the spring as the majority of UK public companies start to hold their annual shareholder meetings. In 2012, LGIM voted against 126 remuneration policies and 22 remuneration committee chairmen. "We want to see that pay is linked to the performance of the company and that executive pay is more aligned to the long-term." Sadan rejects criticism that the attention focused on the issue risks putting top executives off from entering or remaining in the public company arena. "We don't want to lose good people. Of course we want the best people to run companies....we're certainly supporting a lot of management teams." Boardroom diversity is something Sadan is passionate about, and in this case it's all about making a company more investable. "The trick here is to ask whether a company has the right people on its board, the right mix of skills and also a succession plan in place. We've met with lots of companies and talked to them about diversity and we've discussed the threat of quotas.
And we are the good guys here. We don't want quotas. They would mean larger boards, slower decision-making and tokenism. But I feel we're definitely getting there without them." Other issues that Sadan and his eightstrong team (up from three) work on include cyber security, health and safety, environmental issues and labour rights.
But one of his big focuses right now is to find a way to standardise the boardroom evaluation process to which companies have to submit every three years. Boardroom evaluation is currently very inconsistent and Sadan thinks that consistency, as well as a code of conduct for the service, would make it more useful for boards and shareholders alike. He wants investors to get a better idea of what comes out of a boardroom evaluation, though he stops short of wanting the report to be published in full. "We understand we won't get the best out of a review if it is all public but shareholders do need to know more," he says.
He's also been very active in the debate on flotations in the UK, arguing that there should be at least 25 per cent of shares in a publicly-listed company available to independent shareholders. And he'd like more independent brokers to be invited in to see management at an earlier stage in the share sale, in order to write research.
But he doesn't want regulation to be so stringent that it discourages likely candidates for a London flotation.
Being an ex-fund manager, Sadan believes he is in an ideal position to take difficult issues forward. "There's a lot more collaboration than there used to be, and being a former fund manager I think I speak their language." SACHA SADAN CV Born: 1970 Lives: Greenwich ¦ 1982 Educated at Stepney Green Boys School ¦ 1992 University of Manchester, BA (Econ), accounting and finance ¦ 1993 UK equity manager, Universities Superannuation Scheme ¦ 2001 Senior UK equity manager, Gartmore ¦ 2011 Director of corporate governance, Legal & General Investment Management ¦ Season ticket holder at West Ham for 20 years. Also interested in fitness, music events, travelling and digital technology ¦ Married with two boys (c) 2014 City A.M.
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