Press Release

Legal & General Investment Management discuss the role of the board chairman

Wednesday, July 23 2008

At today's Fundamentals briefing, Mark Burgess (pictured), Legal & General Investment Management’s Head of Equities, explained why the ‘board chairman’ is pivotal to corporate governance.

According to Mark, it is generally agreed that an unbiased and empowered individual who sits outside the business is best suited to performing this duty. "An independent non-executive chairman is more likely to act in the best interest of shareholders."

It is not surprising, then, that 85% of the 100 largest UK listed companies have a non-executive chairman in place, while only 12% have an executive chairman and just 3% a combined chairman/CEO.

A board chairman, Mark says, must be able to unify the board, work well with the CEO and remain unbiased when it comes to assessing the management team’s performance. "There needs to be a clear division of responsibilities between chairman and CEO… when an individual holds both positions the concentration of power means they may be able to dominate the company without proper oversight and challenge to their decisions."

Mark explained that, as the largest investor in the FTSE 100, Legal & General Investment Management takes an active interest in corporate governance and examines the role of the chairman in different UK companies on a case-by-case basis. "We maintain an ongoing, close two-way link with chairman of major UK companies to ensure they guide their Boards towards generating shareholder value."