“Persimmon facing revolt over executive pay and non-executive director
Investor bodies release share scheme warning amid concerns new board member Nigel Mills is not independent.
Persimmon, one of the UK’s biggest housebuilders, plans to appoint a new non-executive director to its board this week.
Housebuilder Persimmon could face protests over executive pay and the composition of its boardroom at this week’s annual general meeting.
Investor bodies have issued a warning over a share scheme set up in 2012 which could hand out an estimated £600m to 150 directors by 2022.
Some are also unhappy over the appointment of Nigel Mills as a non-executive director, questioning his independence because he is connected to the builders’ financial advisers, Citi.
Persimmon holds its AGM on Thursday, one of the first of the annual meeting season. It comes on the same day as those of miner Rio Tinto and oil company BP, which is also facing some opposition to its pay schemes.
While pay can often cause controversy at AGMs, this year companies may also face scrutiny about pledges made on climate change and any impact of the UK’s possible exit from the EU.
Advisory bodies have raised several areas of concern about Persimmon to shareholders. One, Institutional Shareholder Services (ISS), has advised voting against the election of Mills to the Persimmon board because of his connections to Citi.
This means he is not seen as independent by ISS, which also notes that Mills sits on the remuneration committee, which is meant to be entirely staffed by independent directors.
The Institutional Voting Information Service (Ivis) – which provides corporate governance research to investors – has also highlighted the relationship between Mills and Citi. Ivis does not give advice on how to vote but has issued an amber alert, its second highest level of warning, to raise corporate governance concerns.
Mills’s appointment to the board was announced in January alongside a series of other changes including the departures of non-executive directors Richard Pennycook, chief executive of the Co-operative Group, and Mark Preston, of Grosvenor estates.
Manifest, another advisory body, drew investors’ attention to the structure of the share bonus scheme. Another leading advisory service, Glass Lewis, also recommended voting against the remuneration report.
A Persimmon official said the long-term incentive plan had been approved in 2012. “This is a long-term plan that runs for almost a decade, which is designed to drive outperformance through the housing cycle and to incentivise the management to deliver the capital return, grow the business and increase the share price. Unlike many other schemes, it extends to around 150 executives.”
ISS does not recommend voting against the remuneration report, but Glass Lewis has advised a no vote because of the structure of the scheme, which is based on the premise that 620p per share – a total of £1.9bn – will be returned to shareholders by the end of 2021. The company has since increased its target to 900p per share but has not adjusted the basis upon which the scheme pays out to executives.
On the appointment of Mills to the board, Glass Lewis has been assured that the senior advisor at Citi has not worked on Persimmon business for three years so it would classify him as independent. However, it will monitor the situation.
ShareAction, a charity that promotes responsible investment, intends to use the AGM as an opportunity to encourage the company to consider living wage accreditation.
In February, when Persimmon announced the higher payout target of 900p a share, it had declared it had achieved an “outstanding performance” with a 34% rise in profits (before a goodwill impairment) to £638m. A shortage of new homes and schemes to encourage house buying have helped housebuilders such as Persimmon – although its shares, and those of its rivals, were among the biggest fallers in the FTSE 100 on Monday amid concerns of a slowdown in the economy.”
