Hermes Investment Management has served notice on company boards that it will get tough on executive pay policies and boardroom diversity.

Hans Christoph Hirt, co-head of Hermes EOS, the body that handles engagement for the investment manager, said that Hermes would vote against the re-election of nomination committee chairmen in FTSE 100 companies that fail to achieve 25% representation for women on boards. .

He also said that Hermes will vote against pay policies that result in “overly complex” pay structures.

Writing in The Telegraph, Hirt sent a clear message to boardrooms to review pay policies and improve on diversity.

He wrote that Hermes wants to see less leveraged pay packages with lower variable pay; seeks higher fixed pay with a “significant” amount paid in shares; and wants long-term incentive plans (LTIPs) to be overhauled so they deliver “sustainable value”.

Hirt said Hermes would vote against pay that appears excessive compared with industry competitors; pay rises substantially above inflation; or where the rise outstrips the workforce average without justification.

On diversity, Hirt wrote: “This is not just the ‘right thing to do’ — diverse boards are ultimately more effective. Boards also need members with varied, relevant professional experience, and independence to provide valuable advice and effective checks and balances.”