Investment giant warns of pay veto over bosses' share options
One of the biggest investors in European companies says it will start voting against boardroom pay plans next year unless firms force executives to hold shares more than three years before cashing them in.
Yesterday's warning from Fidelity Worldwide Investment is the latest instance of shareholder agitation over executive pay, sparked by concerns that some top company officials were lining their pockets despite lacklustre results.
The decision could hit a host of Irish companies with listings in London.
Fidelity, which runs assets of around $240bn (€178bn), said it had conducted a review of more than 300 of the UK stock exchange's largest listed companies and found 238 had either no long-term, share-based pay plans in place or ran schemes that had too short a time frame.
The investment manager said it will vote against company remuneration reports from the start of 2014 if executives are allowed to cash in shares awarded as part of their pay packages within three years.
By 2015 Fidelity expects companies to extend executive share holding periods to five years or face votes against their remuneration reports.
Dominic Rossi, Fidelity's chief investment officer, said the firm wrote to 400 listed companies asking them to lengthen long-term investment pay schemes.
"We believe that lengthening incentive schemes will change corporate behaviour for the better, reducing the temptation to maximise short-term financial performance and instead promote investment and growth," he said.
Through its mutual funds, Fidelity is among the largest shareholders of many European blue-chip companies.
Mr Rossi applauded plans by British-based bank Barclays, in which Fidelity is among the 15 largest shareholders, to cut its wage bill as part of a wider shake-up.
Mr Rossi has also suggested in previous letters to executives the introduction of "career" shares, which directors must hold until they leave the company.
A run of high-profile challenges in 2012 to executive pay packages by investors frustrated at rising boardroom salaries at a time of declining share prices cost the jobs of some high profile bosses, such as insurer Aviva chief Andrew Moss.
Earlier this year, Britain's largest investor associations said they were teaming up to explore ways of giving shareholders a coherent voice in dealings with company boards.