Persimmon shareholders on Wednesday revolted against the “grossly excessive” and “totally and utterly unjustifiable” £75m bonus handed to the housebuilder’s chief executive, Jeff Fairburn.
Several shareholders took to their feet at Persimmon’s annual meeting in York to express their outrage at the “enormous sums” awarded to Fairburn and other senior managers at Britain’s second biggest housebuilder.
Some 64% of shareholders failed to support the huge payout and just 36% voted in favour of the housebuilder’s renumeration policy in one of the biggest expressions of investor frustration in recent years.
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However, despite huge investor anger the pay policy was approved because nearly a third of shareholders abstained from the vote and of those who voted, 51.5% cast in favour and 48.5% against.
Euan Stirling, the head of stewardship at Aberdeen Standard Investments, one of Persimmon’s biggest shareholders with a 2.3% stake, said the payment of “such excessive amounts” had tarnished Persimmon’s brand.
Stirling said that Fairburn’s offer to reduce his bonus from his legally entitled £110m to £75m “does not even get close to acceptable”.
He said being the chief executive of a FTSE 100 company “requires a personal motivation that goes beyond simply amassing a fortune”.
“Regardless of any moral or societal duties, company directors have a legal responsibility to act in the best long-term interests of the company that employs them,” Stirling said. “Today’s remuneration results suggest that the executive directors at Persimmon have lost sight of that because the long-term success of the company is being endangered by the reputational damage associated with grossly excessive pay.”
Andrew Engleby, a private shareholder, told Persimmon’s board that he was sad, disappointed and angry that the “totally and utterly unjustifiable” awards were being paid.
“I’m sorry to say this as someone who has worked in private sector all my life, but that is the case,” Engleby said. “Even the 40% that has vested already is totally unjustifiable.”
Fairburn collected the first £50m worth of bonus shares on New Year’s Eve and will collect the remainder of his long-term incentive plan share award on 1 July. He had been due to collect a total of £110m worth of bonus shares, but has agreed to forgo 50% of the second half of the award following intense criticism. Fairburn has also said he is setting up a charitable foundation, but has refused to reveal how much he will be donating, or the causes that might benefit.
The huge bonus has been attacked by politicians, charities and corporate governance experts, who described it as “obscene”, “corporate looting” and a reward based on “taxpayer subsidies”.
Vince Cable, the leader of the Liberal Democrats, said the “scale of this bonus is obscene” and built on a “government subsidy”. “It is reminiscent of the worst excesses of corporate greed that helped to create the financial crisis, when short-termism was heavily incentivised and long-term planning ignored.”
Persimmon is one of the biggest beneficiaries of the government’s help-to-buy programme, which has lifted sales and boosted house prices across the UK.
Fairburn did not respond to the shareholder outrage to his bonus, leaving Persimmon’s interim chairman, Nigel Mills, to field the criticism. He repeatedly apologised to shareholders for the flawed bonus scheme.
Mills took on the interim chairman position after former chair Nicholas Wrigley resigned over his role in overseeing the bonus scheme, which was not capped to prevent an excessive payout.
However, Mills said the board was powerless to force Fairburn and other senior managers to give up a greater proportion of their bonuses because of “contractual entitlements”.
He added: “Please let me take this opportunity to apologise unreservedly to our shareholders. This could have all have been handled better. Indeed it should have been. It is a matter of profound regret that we got to the position where we had a company with an exceptional management team, delivering exceptional, market-beating performance , that has been overshadowed by a row over pay.”