“Fidelity Investments has a message for companies that it feels overpay their top executives: Enough already!” writes Aaron Lucchetti in today’s Wall Street Journal.

” ‘We’re concerned about grossly excessive CEO compensation,’ says Eric Roiter, general counsel at Fidelity Management & Research Co., the investment arm of the giant Fidelity Investments mutual-fund company that oversees more than $800 billion in assets. While changes aren’t imminent, and may not even happen at all, the fund firm is reviewing how to use its ballots in shareholder votes to protest outsize corporate pay packages, according to Mr. Roiter.”

“One avenue that Fidelity is considering is to withhold its votes for corporate directors that have approved executive compensation plans deemed overly generous by Fidelity. Shareholders don’t have the option of voting against board nominees, but they can withhold their ballots or sometimes vote for rival slates of directors to those backed by management.”

“While withholding votes can send a protest message to company managements, such moves have little more than symbolic value because the management’s slate invariably is elected, some critics contend. Fidelity’s vote could have more impact, they add, if it also publicly identified companies whose executive compensation it deems excessive. But Fidelity, in accordance with a longstanding policy, doesn’t disclose how it votes on individual ballot questions, a practice that isn’t expected to change.”

“‘ The direct result of a withheld vote is nothing,’ says Sarah Teslik, executive director for the Council of Institutional Investors, an activist group consisting mostly of public-employee and labor pension funds. While a vote of no-confidence from a large shareholder like Fidelity gets directors’ attention, she says Fidelity funds ‘could do more if they announced their decisions,’ which could then encourage other shareholders to take similar actions against excessive management pay.”

“Nevertheless, Fidelity’s latest stance on excess compensation marks a tougher line by the world’s largest mutual-fund manager, which holds positions in about 5,000 different stocks, according to FactSet Research Systems Inc. In the past, Fidelity has preferred to work behind closed doors in prodding managements to improve their corporate behavior, saying it could be more successful in obtaining results that way.”

“Fidelity hasn’t settled on how it will define ‘excessive’ compensation, but the Boston fund company is likely to take a comprehensive view, considering everything from stock options to annual pay to bonuses. Another complaint from shareholders recently is that executives can often sell their options quickly, giving them an incentive to boost the stock for short periods even if it leads to a big decline that hurts long-term shareholders.”

“Fidelity’s new stance on executive compensation is the most recent move indicating some large investors are doing more to signal their displeasure with what they consider corporate abuses. During the bull market, for example, shareholders turned a blind eye to executive pay plans, even if extremely generous, as long as they felt the interests of management were aligned with the interests of shareholders. Rich stock-options plans proliferated, often giving top executives large packages of stock and options that could be worth tens of millions of dollars and sometimes much more.”