£128m bonus =
427 homes at £300,000 or
512 at £250,000
– just saying …
“The chair of Persimmon has resigned over his role in orchestrating a £128m bonus for the housebuilder’s chief executive, Jeff Fairburn, that will begin paying out on New Year’s Eve.
Nicholas Wrigley, the company’s chair and a former banker, said he regretted not capping the bonus scheme and was leaving “in recognition of this omission”.
The Guardian understands Wrigley had put pressure on Fairburn to donate some of his bonus to charity, although Persimmon declined to comment.
The bonus scheme – believed to be the most generous ever in the UK – is due to start paying out more than £800m to 150 senior staff on 31 December. The payouts are linked to the company’s stock market performance, which has been significantly boosted by the government’s help to buy scheme.
Persimmon’s share price has more than doubled since George Osborne introduced help to buy in 2013. About half of Persimmon homes sold last year were to help-to-buy recipients, meaning government money helped finance the sales.
The bonuses have been widely criticised by politicians, charities and corporate governance experts contacted by the Guardian this week. One expert described the bonuses as “corporate looting”, while another said directors had their “hands in an open cookie jar”.
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,” he said.
“This is also a perverse situation where a corporate fortune has been built on what is essentially a government subsidy in help to buy. This situation shows just why help to buy is so flawed: it fuels demand rather than supply, putting house prices even further out of reach of young people, while adding zeros to the bank balances of housebuilding executives.”
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Fairburn is due to collect the first £50m worth of bonus shares on 31 December. The scheme, which is based on the level of dividend returned to shareholders, was meant to take 10 years to pay out, but the company has accelerated dividend payments.
This means Fairburn, other executives and more than 100 middle managers are likely to collect all of the £800m worth of shares by July 2018, far ahead of the 2021 schedule.
The top three Persimmon bosses are due to collect more than £230m from the scheme, which was worth 9% of the entire company when it was created.
John Hunter, the chair of the UK Shareholder Association, which represents small investors, said the bonus scheme was “completely ridiculous” and was based solely on the dividend payments.
“Any bloody fool can pay dividends – it’s just paying them their own money. The scheme is doing the opposite of what it is meant to do – incentive performance and retention,” Hunter said.
“How does this incentive people when they’re all sitting on fortunes? If you’re a manager and you’re getting millions you’d retire on the spot.”
Hunter said Persimmon defends the scheme, which was approved by 85% of investors in 2012, as a reflection of the company’s strong performance and the billions of pounds it has returned to investors through dividends.
“It has done brilliantly well – with our money,” he said. “Help to buy has been almost a license to print money – our money. These bonuses are being subsided by us. All building companies have made a lot of money from help to buy, a government subsidy. We, the voters, have subsidised these payments to directors.”
He added: “I don’t blame directors for putting their hands in an open cookie jar – they are only human. The question here is how this scheme ever got approved.”
Jonathan Davie, Persimmon’s senior independent director and chair of the renumeration committee, which sets company pay, also resigned on Thursday.
“Nicholas and Jonathan recognise that the 2012 LTIP [long-term incentive plan] could have included a cap,” the company said in a statement. “In recognition of this omission, they have therefore tendered their resignations.”
Davie resigned with immediate effect. Wrigley will stay on until his successor has been appointed. …”