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Shareholder revolt at 'Mr £131m' boss: City giants challenge builder's 'unjustified' payout

  • Housing giant Persimmon under fire due to planned £630m payout to its bosses
  • Chief executive Jeff Fairburn is set to pocket an initially estimated £131million
  • Up to 150 managers at the York-based housebuilding firm will join in bonanza
  • But fund manager and firm's largest shareholder expected to challenge scheme 

Major shareholders are in revolt over a ‘completely unjustified’ £630million payout for housebuilding bosses.

Persimmon has been under fire ever since it announced the bonus scheme, which is one of the biggest in UK business history.

Chief executive Jeff Fairburn is set to pocket a windfall initially estimated at £131million. Up to 150 managers will join in the bonanza.

Major shareholders are in revolt over a ‘completely unjustified’ £630million payout for housebuilding bosses.  Chief executive Jeff Fairburn could pocket £131million

Major shareholders are in revolt over a ‘completely unjustified’ £630million payout for housebuilding bosses.  Chief executive Jeff Fairburn could pocket £131million

BlackRock, the world’s biggest fund manager and Persimmon’s largest shareholder, is expected to challenge the share scheme because it has vowed to clamp down on corporate excess.

Aberdeen Asset Management, another major shareholder, is writing to the Persimmon board to voice its concerns.

Two more leading City institutions, Axa Investment Managers and Royal London Asset Management, have opposed the payouts.

Persimmon board members have opened talks with City investors in an attempt to head off a showdown.

‘It seems to me that the board are increasingly concerned that they need to do something,’ said one major investor. ‘They are speaking to shareholders at the moment and shareholders are expressing their concerns.’

Persimmon, which is based in York and is the country’s second-largest builder, sold 16,043 homes last year at an average price of £213,300.

Persimmon, which is based in York (pictured) and is the country’s second-largest builder, sold 16,043 homes last year at an average price of £213,300

Persimmon, which is based in York (pictured) and is the country’s second-largest builder, sold 16,043 homes last year at an average price of £213,300

The company has come under fire for failing to cap the payouts eligible through its long-term incentive plan, or LTIP, which was agreed in 2012.

The bonus pot has soared in value as the recovery in the property market – fuelled by the government’s Help to Buy mortgage scheme – drove the Persimmon share price higher. Mr Fairburn was dubbed ‘Mr £131million’ this week but the share price has since dipped, trimming his cut to £128million. A spokesman for Aberdeen, which has a £202million stake in Persimmon, said yesterday that it was ‘awaiting developments’.

But fewer homes built

Persimmon is building fewer homes than it was before the financial crisis, according to its own figures.

Chief executive Jeff Fairburn says a hugely lucrative pay deal has encouraged the company to ramp up production. However Persimmon built 16,043 homes last year – 658 short of the 16,701 it built in 2006 before the economic crash.

Rivals have increased construction at a faster rate during the recovery – without offering their bosses such huge payouts.

While annual production at Persimmon has risen 70 per cent since the bonus scheme was approved in 2012, it has risen 96 per cent at Bellway and 109 per cent at Redrow over that time.

Other builders have expanded over the same period, with annual production up 56 per cent at Barratt and 43 per cent at Taylor Wimpey. Sales have been boosted by Help to Buy.

Ashley Hamilton Claxton of Royal London Asset Management, which holds a £23.5million stake, said the bonus scheme ‘did not take into account the impact that the national housing shortage and government support for the sector would have on performance’.

She added: ‘We have longstanding concerns about pay at Persimmon. The company’s performance has been impressive, but we continue to believe that the sheer scale of remuneration is excessive.

‘We would ask that the chief executive and members of the pay committee acknowledge their errors and correct them.’

Mr Fairburn, 51, says the share scheme has encouraged the firm to build more homes. ‘It has done exactly what it set out to do,’ he insisted.

Liberal Democrat leader Sir Vince Cable said: ‘These bonuses are absolutely and completely unjustified. But it is not just corporate greed. It is financed by the taxpayer.’

 

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Journalist, writer and broadcaster, based in London and Paris, her latest book is Touché: A French Woman's Take on the English. Read more articles from Agnes.

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