Persimmon’s chairman Nicholas Wrigley has resigned over his failure to cap a controversial bonus scheme that will see the housebuilder’s chief executive receive a £128m payout
In a statement, the company said Wrigley recognises a cap should have been imposed on the 2012 Long-Term Incentive Plan (LTIP), which will see a total of around £800m paid to 150 senior executives, and he has decided to step down “in recognition of this omission”. Jonathan Davie, chairman of Persimmon’s Remuneration Committee, has also resigned.
Liberal Democrat leader Vince Cable has described the £128m bonus for chief executive Jeff Fairburn as “obscene” and “built on what is essentially a government subsidy”.
Meanwhile, one industry expert told the Guardian the LTIP amounts to “corporate looting”.
In its statement, Persimmon said: “The board believes that the introduction of the 2012 LTIP has been a significant factor in the company’s outstanding performance over this period, led by a strong and talented executive team.
“Nevertheless, Nicholas and Jonathan recognise that the 2012 LTIP could have included a cap. In recognition of this omission, they have therefore tended their resignations.”
It added that since the 2012 LTIP was approved by its shareholders, it has increased the supply of new homes by over 65%, invested £2.9bn in new land, returned dividends of 485p per share in cash and increased the proposed capital return by 49% to 925p per share, circa £2.85bn.
However, campaign group the UK Shareholders’ Association (UKSA) has condemned the scheme as “outrageous”.
“UKSA does not object to LTIPs in principle, but we did object to this plan when we heard of it because of its extreme generosity to the company’s managers at the expense of its owners, the shareholders,” it said in October 2013.
Responding to the announcement of Wrigley’s resignation, the UKSA said: “The story of the Persimmon LTIP illustrates fundamental flaws in the governance, measurement and reporting of executive pay that were as obvious in 2012 as they are today, and which the recent changes in the regulations conspicuously failed to address.”
Persimmon said Wrigley will remain as chairman “to allow an orderly process while the board seeks a successor”.