| LONDON, Sept 23
LONDON, Sept 23 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.
Monday'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 and regardless of pay
constraint elsewhere in the economy.
Fidelity, which runs assets of around $240 billion, said it
had conducted a review of more than 300 of Britain'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 at shareholder meetings, the firm said.
Dominic Rossi, Fidelity's chief investment officer, said the
firm wrote to 400 listed companies across Europe last summer
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.
Rossi has been outspoken on executive pay in recent months
and 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.
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 Plc chief Andrew
Moss, and became dubbed the "shareholder spring".
Earlier in 2013, Britain's largest investor associations
said they were teaming up to explore ways of giving shareholders
a coherent voice in dealings with company boards on strategy,
including executive pay.
The National Associate of Pension Funds (NAPF), Association
of British Insurers (ABI) and fund management body the IMA -
which speak for funds controlling billions of pounds - said they
were acting in response to a government-backed report.
Economist John Kay's report, commissioned by the UK
government and published in July 2012, criticised short-termist
corporate culture and recommended shareholders are helped to
more effectively scrutinise management performance.
In July, a report by the UK parliament's Business,
Innovation and Skills Committee (BISC) called on the government
to push the financial industry harder to adopt Kay's
The report's authors claimed "a cultural change will not
happen without a catalyst" and that the investment management
industry is not implementing voluntary reforms fast enough.