Fund management group Fidelity Worldwide Investment has attacked long-term incentive plans (LTIPs). With these, executives can cash in shares if they hit particular targets and hold the shares for a certain amount of time, typically three years. Fidelity wants them to hold them for five years.
It says this should reduce the temptation for executives to "maximise short-term financial performance" in order to get their hands on the share awards, and instead make them concentrate on promoting sustainable growth and long-term investment. Fidelity has threatened to vote against remuneration reports at firms that ignore this suggestion.
What the commentators said
One issue they need to focus closely on, as Robert Peston pointed out on BBC.co.uk, is the nature and complexity of the targets in these LTIPs. They typically "run to many pages of formulae and clauses, such that they are impossible to understand". So naturally the suspicion is that this makes it far easier for directors, and the remuneration consultancy industry that supports them, to game the system and thus add huge amounts to their basic pay under shareholders' noses. Even if that's not the case, why can't we have pay agreements that "someone who isn't a grandmaster in 3D chess might be able to grasp"?
Nikkei 225 reaches record high: should you invest in Japan?
Japanese equities have soared to an all-time high. But do they still offer good value and should you invest?
By Katie Williams Published
The Co-op unveils new 7% regular saver- is it the best on the market?
The Co-operative Bank has launched a new best buy regular saver offering 7%. Is it the top deal and how does it work?
By Vaishali Varu Published