Asset managers need to do more on governance

Wednesday 12 August 2020

Sacha Sadan

Author: Maha Khan Phillips

Sacha Sadan, ASIP, talks to Professional Investor about why asset managers need to step up on corporate governance, the perils of greenwashing, and lessons he has learnt in his career

Sacha Sadan, ASIP, is not a man to shy away from a cause.

As Director of Investment Stewardship, and a Board Member at one of Europe’s largest asset management firms, Sadan has been a vocal opponent of contentious executive pay awards, and was a lead architect of 2012’s ‘shareholder spring’, so much so that the Financial Times recognised him as one of the 30 most influential people in the City of London in 2017.

He remains vocal about the things that concern him. “You have to challenge the status quo,” he says. “That’s part of the job.” 

One of the issues he challenges is groupthink in the City. As the first person in his family to go to university, Sadan pushes for diversity at every opportunity. “It makes absolute business sense to challenge a board to have a diverse range of views. It was seen as a shock when we first voted against all-male boards six years ago. But it’s not a shock now,” he points out.

Sadan began his career at the Universities Superannuation Scheme in 1994, one of the first two graduates to be taken on by the asset owner. “It was a fabulous entry to the City, because I was working in finance, and looking after people’s pensions," he says. "I really thought about that, and I cared. We got involved in a lot of things, but everything always came down to the end investor. Whose money was it that we were responsible for? When I look at a company now, I always think, do they really care about people’s money? Do they care about my mum’s money? I saw a lot of examples of corporate greed."

In 2002, Sadan moved to Gartmore, to become a Senior UK Equity Manager. The firm was going through a lot of change at the time. “I went through a takeover, a stock market IPO, and I saw a massive profit warning. It is very hard to keep a culture going when there are new bosses, and so much change,” he says.

How to improve corporate governance

Still, it was a learning experience. “Instead of running just institutional equity for one big asset owner, I was involved in retail money, hedge fund money, and institutional short term money. It really got you the eye of why people make decisions the way they do, why there is so much short-termism in the market. It also helped me hone my skills as an investment professional, and manage all kinds of risk,” he says.

Sadan moved to LGIM in 2011, and has also been a Board Member for the last nine years. He believes other asset managers need to step up much more, and bring corporate governance expertise on to the board.

“Corporate governance is important enough that LGIM put me on the board. They empowered me, and I could then empower my team. My call to arms is that there are some great people at some of my peer companies, but they don’t really have enough power. Put corporate governance people high enough so that they have the power to make real decisions,” he argues.

He also wants asset managers to manage conflict of interests better. “It is not easy to vote against someone the sales team might want to sell product to, or to support a company that is doing the right thing but might not look it in the short term. If you work for a firm that supports the management of these conflicts, it makes life a lot easier,” he says.

In his current role, Sadan has overall responsibility for environmental, social and governance (ESG) investing. Unsurprisingly, he is an advocate for further efforts by asset managers. “There is a lot of greenwashing out there. We’ve got to make sure we don’t promise too much as an industry. I’m pleased to see that the regulator’s Stewardship Code is trying to make people report what action they’ve taken. Don’t tell me you’ve got a policy. Show me what you’ve done. Outcomes are much more important than policy. I wouldn’t buy a climate change fund from an asset manager that didn’t care about climate change in 98% of their other funds that don’t come with a climate change wrapper. This has to be part of the DNA of the industry,” he argues.

He says he has learnt a few key lessons along the way. Humility is one of them. “Just because something goes right, it doesn’t mean you were great, or the other way around. I have seen the opposite of humility so often. I’ve seen companies that thought they were masters of the universe, and have then seen them fall apart. What I love about the City of London is that you don’t know who you will be working with or involved with next. So it is important to treat everyone like you’ll meet them again. It’s important to treat everybody with respect, no matter what their background or areas of expertise.

And never judge a book by its cover, he says. “I went to an East End boys comprehensive school, whereas a lot of my greatest City friends went to top private schools and have children with names I’d never heard before. Some my closest friendships now, I once would never have imagined happening in a million years."

Sadan is also a passionate West Ham supporter (his first dream job was to be a football player for the team). “I couldn’t play for West Ham, but I have managed to keep the season tickets for thirty-five years, and my family go with me and watch us lose every week,” he laughs.

 

Sacha Sadan, ASIP is Director of Investment Stewardship, and a Board Member at Legal & General Investment Management.

 

 

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