Persimmon in close shave as almost half of shareholders refuse to permit pay report which awarded boss £110m
Homebuilding giant Persimmon just about managed to keep its house in order today, narrowly avoiding a full-blown shareholder revolt at its AGM.
The housebuilder had been in hot water over a long-term incentive plan (LTIP), approved by shareholders in 2012, which awarded its boss Jeff Fairburn a massive £110m bonus.
Although Fairburn has agreed to take a reduced £75m, top-10 shareholder Aberdeen Standard Investments said that the payout “does not even get close to acceptable”.
Read more: Boss’s £110m bonus package “tarnishes Persimmon’s name” says riled major shareholder Aberdeen Standard, as AGM results “too close to call”
“What is clear is that in 2012, no-one expected Persimmon’s name to be tarnished by the payment of such excessive amounts,” said Euan Stirling, head of stewardship at Aberdeen.
He added that a company’s directors should have its long-term interests at heart, but that Persimmon’s board had “lost sight of that because the long-term success of the company is being endangered by the reputational damage associated with grossly excessive pay”.
Despite Stirling’s battle cry at the AGM, Persimmon narrowly clinched the majority of support – though a hefty 48.52 per cent of voters condemned the pay report, while 30.9 per cent of shareholders abstained from voting.
A small 2.2 per cent took their protest a step further and voted to oust Fairburn. One major shareholder told City A.M. that it had considered doing the same, but decided “the board had endured enough short-term turmoil”.
However the shareholder added that Roger Devlin, Persimmon’s new chairman who was appointed at the AGM, would have “cultural issues” to iron out.
Blackrock was the only one of Persimmon’s top three shareholders to vote against the pay report. “We believe compensation plans should reward management for delivering strong and sustainable long-term performance, with an emphasis on factors that are within management’s control,” a spokesperson said.
“Persimmon’s compensation plan highlights the unintended consequences of overly mechanistic pay structures, particularly ones that can be influenced by external events.”
The asset management giant also said it had voted to boot out directors who served on Persimmon’s remuneration committee.
Read more: UK housebuilder Persimmon posts £2.76bn revenue in first quarter
The FTSE 100 firm had been telling shareholders that Fairburn’s bonus was well-deserved.
“Total shareholder returns to date from the launch of the group’s new strategy in 2012 now exceed 500 per cent, placing us at number two in the FTSE 100 and we have delivered more than £8bn to shareholders in that period,” a spokesperson said in a statement.
But Persimmon conceded that shareholders were unhappy with the executive pay, and noted that it had taken measures to cap future payouts.
“We are grateful for the support that allows us to draw a line under the 2012 LTIP debate and move forward,” the spokesperson added.
There were some casualties in today’s meeting, as Persimmon’s directors all waived their salary increases in 2018 and executive directors waived their 2018 bonuses.
Earlier in the day, the business revealed forward sales revenue was up eight per cent in the first quarter of this year to £2.76bn. It also sold 9,048 new homes over the three months, up from 8,928 over the same period last year, as average selling prices climbed.
Read more: Persimmon is under pressure on paying the “real living wage” at today’s AGM amid wider shareholder revolt on executive pay