A leading City investor has warned plans to pay Persimmon’s management a share of £600m in bonuses over the next five years is ‘too high’…
Housebuilding firm Persimmon plans to pay its management team a share of £600m over the next five years as part of an executive pay plan.
However, the scheme, which represents the largest at a FTSE 100 company outside of banking, has been heavily criticised by a leading City investor. Royal London Asset Management’s Mike Fox said the payments, which could see Persimmon’s chief executive Jeff Fairburn earn more than £100m, were too high “in all circumstances”.
Fox urged Persimmon’s board to show restraint, citing the housing crisis and support from the government for the sector.
The scheme was put in place shortly after the 2008 recession, as the housing market began to recover. Some 150 managers were given the chance to earn shares worth up to 10 per cent of the company’s total value. This would be paid out providing the management teams hit targets on returning money to investors.
Persimmon revealed recently it was ahead of those targets, which means it is likely the scheme will pay out in full. In fact, since the incentive plan was put into place shares have more than tripled, increasing from £6.20 to around £20. While the majority of shareholders have backed the scheme, there are some who are opposed. Critics said executives are being rewarded for being in their roles during a period of recovery in the housing market.
Persimmon defended the payouts, stating that since the scheme was started the firm has increased the number of new homes it builds by half and invested more than £2bn in new land. It has also paid back some £1bn to its shareholders.
The company said: “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.”
