While we understand the desire for our investee companies to pay competitively and reward management fairly, given the continuing uncertainty about the post-Covid economic recovery we are advocating for a restrained approach to executive pay this year:
- Remuneration committees must remain mindful of ensuring that variable pay outcomes broadly reflect shareholders’ experience, and appropriate discretion should be applied when this is not reflected in formulaic outcomes.
- We expect companies that have participated in taxpayer-supported employee furlough schemes to not pay bonuses (cash or otherwise) to executive directors and senior management for FY20.
- We strongly encourage scaling back LTIP grants in monetary terms to account for any temporary fall in the share price. Companies that did not do this in 2020 should put a hard cap on the pay outcomes to prevent windfall gains.
- When evaluating pay outcomes, we will consider the consistency between company’s treatment between senior management and the general workforce. We expect senior management salaries to be frozen or rise only modestly next year and in any event, not beyond the workforce rate of increase.
- Any ex-post adjustments to performance targets should be well-explained in the remuneration report and should respect the principles of shareholder alignment and consistent treatment with the broader workforce.
- The Covid-19 crisis has highlighted the importance of appropriately reflecting stakeholder outcomes in executive pay. Looking ahead to FY21, we will be encouraging investee companies to incorporate appropriate non-financial and/or stakeholder-focused factors into their remuneration policies where they have not done so already and where sufficiently robust metrics can be identified.
“Recognising that the Covid-19 pandemic has affected all of our investee companies to some degree, we think it is particularly important this year that executive pay outcomes at our investee companies should appropriately reflect not only their performance, but also their stakeholders’ experience through the pandemic. While we understand the desire for our investee companies to pay competitively and reward management fairly, given the continuing uncertainty about the post-Covid economic recovery we are advocating for a restrained approach to executive pay this year.”
About Fidelity International
Fidelity International offers investment solutions and services and retirement expertise to more than 2.5 million customers globally. As a privately held, purpose-driven company with a 50-year heritage, we think generationally and invest for the long term. Operating in more than 25 countries and with $706.3 billion in total assets, our clients range from central banks, sovereign wealth funds, large corporates, financial institutions, insurers and wealth managers, to private individuals.
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Investors should note that the views expressed may no longer be current and may have already been acted upon. CC21/02
