Partner Article

Major overhaul of pay policies needed says fundraiser

A major city fundraiser has called for a radical overhaul of pay policies, including the requirement that directors hold shares for the duration of their careers.

Fidelity Worldwide Investment believes that businesses must simplify schemes and focus them towards long term goals by requiring directors to hold any share awards for five years rather than the current three.

It is also encouraging the idea of “career shares”, which would be required to be held until retirement. HSBC has already introduced this type of pay plan, despite the fact that 15% of shareholders failed to support it.

This change follows the “shareholder spring”, which saw a number of remuneration policies voted down by disgruntled investors frustrated by poor links between pay and performance.

Dominic Rossi, global chief investment officer of equities at Fidelity Worldwide Investment, said: “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.

“This has given rise to pressure from shareholders and others to do more to restrain excessive pay awards.”

Fidelity believe that it is in the interest of all parties tp address the issues relating to corporate pay, which is increasingly becoming a major distraction for both investors and boards, and by implementing their suggestions manager interests would become “fully and transparently aligned”.

This was posted in Bdaily's Members' News section by Ruth Mitchell .