Anglo American embraces long-term incentive plans

SHARE   |   Sunday, 06 July 2014   |   By Othusitse Tlhobogang

Anglo American is among the UK companies to be "fully five-year compliant" according to a study by fund manager Fidelity Worldwide released on Thursday. UK companies are responding to pressure from investors and the government to make bosses wait longer for stock bonuses, and more shareholders should now add their weight to the campaign, Fidelity said.

Fidelity, among the largest shareholders in Europe’s top companies, said last year it would oppose any long-term incentive plan (LTIP) that allowed bosses to cash in stock options within three years, and from next year it would vote against any plans lasting less than five years.

The global fund manager’s decision came after a public outcry against high levels of executive pay at blue-chip companies during times of austerity prompted the British government to insist that bonus plans be signed off by shareholders to hold companies to account, encourage longer-term decision making and improve returns.

Now, nearly half of FTSE 100 firms insist executives hold onto share options for a minimum of three to five years, said Dominic Rossi, Fidelity’s chief investment officer for equities. That compares with 17% of companies at the start of last year.


"The standard three-year LTIP model, which has dominated remuneration schemes in the past, has been broken and is now in retreat," said Mr Rossi. There was more to do in the next 12 months.
"We want to make sure that the majority of organisations have moved and that we get an increasing number above our minimum of five years," he said. Mr Rossi said the changes "haven’t come without some pain". Fidelity, which manages about £160bn in assets ($272.3bn), has voted against at least one proposal at 52% of AGMs so far this year, the first time it has voted against a majority of boards.