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Aberdeen Standard slams Persimmon pay as backers rebel

Aberdeen Standard slams Persimmon pay as backers rebel

Aberdeen Standard (ASI) joined a significant mutiny against a bumper executive pay package at housebuilder Persimmon yesterday, which just scraped through with almost a third of votes abstaining. 

The company secured the narrowest endorsement of a widely condemned £75 million payout for chief executive Jeff Fairburn, with 51.5% of the votes cast in support and 48.5% opposed. 

Including abstentions, less than a third of voting rights were cast in favour of the scheme.

Even after the business agreed to reduce the payout from a previous maximum of £110 million, ASI - which holds a 2.3% stake in Persimmon - described the package as ‘grossly excessive'.

ASI head of stewardship Euan Stirling said that while the firm ‘appreciates the concessions made by the chief executive, the reduction... does not even get close to acceptable’.

Persimmon has in recent months found itself in the eye of a political storm about the size of the payout due to Fairburn at a time when housebuilding remains historically low.

Fairburn has gone out of his way to defend the size of the payout, even as chair Nigel Mills yesterday issued a grovelling apology to shareholders over the poor design of the bonus scheme.

At the end of last year, his predecessor as chair Nicholas Wrigley quit over his role in designing the incentive structure, while remuneration committee chairman Jonathan Davie also left the business.

The terms of the incentive deal were written in 2012. Since then monetary support and quantitative easing have effectively backstopped then inflated the housing market.

Stirling (pictured) added: 'Regardless of any moral or societal duties, company directors have a legal responsibility to act in the best long-term interests of the company that employs them.

'Today’s remuneration results suggest that the executive directors at Persimmon have lost sight of that because the long-term success of the company is being endangered by the reputational damage associated with grossly excessive pay!'

He said that while the executive team at Persimmon had been 'very successful' in narrow terms leadership roles required more.

'It requires a broader context. It requires a personal motivation that goes beyond simply amassing a fortune. It requires an understanding of where the company sits within the society within which it operates. Little of that is evident currently at Persimmon,’ he stated.

Following discussions with shareholders, the company said that it would cap the future value on exercise to a maximum value equal to £29 per share, it would extend the holding period under any second tranche and make it subject to continued employment. 

It added that there will not be any performance share plan awards to executive directors in calendar year 2018. The earliest for any awards to executive directors therefore is 2019. 

For 2018, directors have also waived increases to their salaries and participation in any bonus. 

Aberdeen Standard Investments holds 7.1 million shares in the company on behalf of its clients, worth approximately £191 million at a share price of £26.94.

Stirling welcomed recent changes at Persimmon’s board as necessary and positive and recognised the efforts by non-executives to try and improve the situation.

However, he concluded: ‘We remain very keen to hear the board’s explanation as to how, in the current situation, it is fulfilling its legal obligation to promote the long term success of the company, taking into account all stakeholders.’

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