Fidelity shares will gain 18% less
Payout called 'healthy' in light of market declines
Fidelity Investments has added $85.99 to the value of private company shares given to employees and other top insiders for 2008, an increase about 18 percent smaller than in the previous year, a spokeswoman said at the mutual fund giant's annual meeting yesterday.
The additional value, which the company sets each year, determines how much stockholders of the family-controlled business will receive in dividend-like payouts for 2008, and is a major part of the company's pay structure. Spokeswoman Anne Crowley declined to go into much detail about how it set the shares' additional value, which came in about $19 less than the $105 or so the firm confirmed it set for 2007.
Still, some Fidelity insiders consider the new figure a mixed blessing, since it doesn't represent nearly as big a hit to profits as other publicly traded asset managers have taken from broad stock market declines since last fall. Many financial firms have put significant pay cuts in place, including State Street Corp. of Boston and Bank of America Corp.
"Given everything that's going on in the world, with people out of work and all, it could be worse," said one Fidelity shareholder, speaking on condition of anonymity because the company didn't authorize the comments.
Technically, the figure represents the change in the "net asset value" of the insiders' shares, which is assigned by Fidelity each year. Senior employees can amass thousands of these shares, to the point where the payments connected to the shares equal half the annual compensation of the employees who hold them. Officially, 51 percent of the company's voting stock is held by employees, with the remainder controlled by the founding Johnson family, including chairman and chief executive Edward C. Johnson III.
Crowley said the 2008 figure was in line with the average annual additional share value of $87.20 for all of the current decade. She spoke outside Fidelity's annual meeting at the Seaport World Trade Center in Boston. The meeting was closed to the press. But Crowley said the figure should be seen as a sign of the company's strength since in theory, it could have paid out a much lower amount for 2008. "You should view it as a very healthy increase," she said.
Although the company's mutual funds have fallen significantly in value in parallel with stock market declines, the company has taken steps to preserve its finances, including laying off at least 3,000 of the 44,400 workers it had last fall, she said. "We took a number of steps throughout last year that helped us get ahead of circumstances," Crowley said.
Outside analysts follow the change in the company's net asset value as a rough measure of Fidelity's overall financial performance. In that light, Fidelity's lower figure for 2008 would reflect a substantial decline among its own investments, including real estate and private businesses such as the Boston Coach limousine company and a Maine tomato-growing enterprise, said Matthew Noll, an analyst for Moody's Investors Service in New York, who follows Fidelity.
Noll said he expects Fidelity to report "modestly lower" revenue and profit figures for 2008 compared with 2007, when the firm earned $2.2 billion before taxes on revenue of $14.9 billion. The firm hasn't reported its results yet, but traditionally discloses them this time of the year.
But Noll said that compared with other fund firms, Fidelity has benefited financially from its diversification into areas such as its money-market mutual fund lineup, retirement services division for big employers, and an online brokerage unit, which earns more money the more people trade in stock markets.
Ross Kerber can be reached at kerber@globe.com. 
