Fidelity: Give shareholders more power to veto excessive pay

Rejected stampFidelity is calling for boards to give shareholders more power to veto boardroom bonuses, in a bid to make executive remuneration more transparent and simple.

Change is necessary because “individual instances of inappropriate levels of executive reward have destroyed public trust and led to a situation where all directors are perceived to be over-paid”, said the company in an open letter.

Fidelity is proposing that shareholders take a vote before any annual variable compensation is paid to directors. The resolution would need 75% of votes cast to go ahead – currently 50% is enough – or the board would need to seek a new resolution. If the board were to fail to receive 75% on the second resolution, the chairman of the remuneration committee should resign, said Fidelity.

“During the last bull market, boardroom pay dramatically increased relative to the average pay of all employees in a company. Despite the financial crisis of 2008, this trend is continuing. The simple truth is that remuneration schemes have become too complex and, in some cases, too generous and out-of-line with the interests of investors,” said Dominic Rossi, chief investment officer, equities, Fidelity Worldwide Investment.

“We say to Remuneration Committees: Make sure you understand the mood of the market; tell us in simple terms what you propose; and let shareholders decide. Companies have nothing to fear if what they propose is fair and reasonable and clearly aligned to what is good for long-term shareholders.”

©2012 funds europe