The fund manager is calling on companies, including major banks, to simplify their bonus schemes and skew them to the longer term by requiring directors to hold any share awards for five years, rather than the current three.
It is also adopting the idea of 'career shares', where part of the awards of shares must be held until retirement. Fidelity has previously cited HSBC as a company which has adopted a 'career share' approach to executive pay. Last year the bank introduced a pay plan that requires directors to hold shares until they retire – although when it was put to the vote some 15% of shareholders failed to support it.
The change follows the 'shareholder spring' when a number of remuneration policies were voted down by investors disgruntled over a poor link between pay and performance. Brewer SAB Miller was the latest to have a revolt over pay on Thursday when more than 20% of investors voted against its pay policies.
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'.
Companies as diverse as advertising company WPP and insurance company Aviva have had their remuneration policies voted down this year. The rebellion at Aviva forced out chief executive Andrew Moss, while Sly Bailey quit as chief executive at publisher Trinity Mirror in a row over her pay.
Rossi, who has called for the votes on remuneration policies to be set a threshold of 75%, said: 'We believe that it is in the interest of all parties to allay concerns about corporate pay, which has become a major distraction for investors and boards alike. 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'.
Vince Cable, the business secretary, has kept the threshold for support at a simple majority of 50% and stepped back from introducing an annual binding vote on new pay policies, instead opting for a vote every three years. An annual mandatory vote on existing pay policies, introduced by Labour a decade ago, remains in place.
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