Fidelity to change exec pay voting policy
Campaigning CIO aiming to control executive pay in the face of poor shareholder returns.
Fidelity’s global chief investment officer (CIO) for equities has written to all of the group’s investee companies outlining changes in its voting policy on executive remuneration.
The debate surrounding executive pay has hit the headlines this year and most recently flared up after remuneration packages were announced for top Barclays staff in spite of the bank being fined a record £290m for attempting to manipulate inter-bank lending rates.
Business secretary Vince Cable pledged in May to give shareholders an annual binding vote on future company policy and the issue of executive pay also featured in the Queen’s speech.
The Fidelity CIO has been outspoken on the topic of executive remuneration since January, when he published an open letter calling for shareholder approval of executives’ bonuses.
Shortly afterwards, prime minister David Cameron named Fidelity in a speech welcoming companies’ calls for better policing of boardroom pay.
Now Mr Rossi has revised its principles of ownership to require a guaranteed period of at least five years between the date of the grant of a share award and the sale of any of these shares.
He added this requirement should apply irrespective of whether the grant of shares is subject to any performance hurdle and that a portion of the shares awarded should be in the form of “career” shares which must be retained until termination of employment within the company.
“In recent years the pay of top executives has increased even as returns to shareholders have been poor and we believe that the majority of schemes are insufficiently long-term in their perspective,” Mr Rossi said.
“This has given rise to pressure from shareholders and others to do more to restrain excessive pay awards.
“While we believe that the remuneration committee of the board has the primary responsibility for determining board pay we have come to the view that these policies should be subject to shareholder approval.”
Mr Rossi said this measure would “ensure better alignment between the interests of owners and managers” and “critically will also reduce the temptation for external agencies to impose arbitrary limits on future pay practice”.
The CIO said it was in everyone’s interest to deal with concerns surrounding corporate pay.
“We have no objection to outstanding pay for outstanding performance but the interests of managers and owners need to be fully and transparently aligned and we hope that our revised guidelines are a step in this direction,” he added.