Is Legal & General a model of ‘inclusive capitalism’?

The words “inclusive” and “capitalism” would seem to be mutually exclusive in a modern Britain where, per the High Pay Centre, the average CEO’s pay packet surpassed that of the median average worker’s on 6 January. 

And there were as many FTSE 100 CEOs named Andrew as there are women.  And where monochrome boards still aren’t anything like as rare as you’d hope.

But it can still be done, says Legal & General, the insurer and asset management group, which plastered the word all over its annual results statement. Give us time because we’re getting there. 

Try challenging CEO Nigel Wilson on the subject and he’s off like a hare pursued by a pack of greyhounds. You won’t find many evangelists who can preach as well as this man, who famously grew up in social housing but went on to build a glittering career in business having first earned a PhD from America’s globally renowned MIT before joining McKinsey. He regularly wins awards of the “most admired business leader” variety. 

Wilson says he wants to create a situation where more people like him are able to take advantage of the same sort of opportunities he was able to grasp - he believes that the UK badly needs investment, and he is convinced his company can handle both while making shareholders smile. 

That means pumping money into projects such as Media City in Manchester, which L&G owns half of, and which he regularly talks about. He also points to projects in Cardiff, and recently Bristol. 

He has a vision and it’s a bold one that’s driven this company for a while now. 

It should also be said that it’s a successful one as regards the company’s results. This time around, Covid knocked £228m from the bottom line, partially offset by a release from the annuity business because people didn’t live as long as expected. But there was no going cap in hand to the government for furlough cash. 

Operating profit slipped 3 per cent, but the dividend was held (when others have been cutting) and the City had few complaints. 

L&G has made a habit of delivering on its promises to its investors. The shares’ thumping 6 per cent yield suggests that they have become a mite complacent about that. The stock probably ought to be higher (and yield less). Part of the problem may be down to shareholders fretting about L&G’s activities investing in, and sometimes lending to, the UK economy. Those concerns may be overdone. 

But when the business talks about inclusivity, does it live it?

Wilson says it does, pointing to the company’s record of appointing women on to its executive committees, its blind hiring which can assist with recruiting minorities, the way pay rises have recently been aimed at those on the lowest wages while those that the top have had a freeze imposed. He’s keen to stress that most of his senior colleagues are state educated, which is quite rare at the top of British business. 

I’ve previously covered Legal & General Investment Management’s voting record on environmental, social and governance issues where it can genuinely be considered a world leader and is at the top of the pile in this country. 

On the other hand, there is no employee representation on the board, and nor has LGIM really encouraged that among companies in which it holds shares. Wilson’s response to why this is so is glib: boards deal with heavyweight legal and regulatory matters as opposed to operational issues. None of his employees has ever raised this as in issue with him. 

But are they comfortable with doing so? Do they even have the facility to do so at the companies in which L&G invests? They don’t all have progressive ideas or CEOs who believe talking to staff is a worthwhile activity.

Boards are also supposed to pay heed to employees’ interests, per the governance reforms enacted by Theresa May’s administration. Having an employee director, as opposed to delegating an existing one to look after the issue, would send an important, and inclusive message but Wilson seems less than willing. 

This is an issue that creates controversy in Britain, but not in Europe, where they are an established feature on the boards of some very successful companies. 

L&G’s investments in social housing also make me feel a mite queasy, having, like Wilson, spent a significant chunk of my childhood living there. Should they be a source of profit? Does shared ownership - a lot of L&G funded properties are in this category - really represent a good model? 

As far as inclusion goes, L&G still might be as good as it gets when it comes to the FTSE 100. In some ways, it is admirably and genuinely progressive.

In others it isn’t so cutting edge and there is, perhaps, a whiff of paternalism about the way it goes about things. To truly live up to the meaning of the word it trumpets, there are still steps it could take which wouldn’t be all that hard to achieve and which would set an example to others. 

Dare I suggest that it might get closer if the fiercely intelligent Wilson, who’s a tip top debater, a very engaging talker, and who genuinely seems to want to do the right thing, were a better listener?