Persimmon admits failures over ‘egregious’ pay plans
The housebuilder saw 48.5% of investors vote against the pay plans in April as they vented anger over a £75 million payout for the company’s chief executive.
Housebuilder Persimmon has admitted a raft of failures that led to an embarrassing shareholder rebellion over pay as MPs slammed an “egregious” pay deal for top bosses worth more than £100 million.
Marion Sears, remuneration committee chair at Persimmon, told MPs in a Commons committee hearing that the group had agreed an executive pay deal with no discretion or cap and failed to talk to shareholders early enough to resolve the row.
Charles Church builder Persimmon saw 48.5% of investors vote against the pay plans in April as they vented anger over a £75 million payout for chief executive Jeff Fairburn.
Earlier this year, shareholders and politicians united to condemn what would have been an even higher £100 million payout, until Mr Fairburn voluntarily moved to calm the furore by handing back £25 million in bonuses.
Other senior executives also landed multimillion-pound payouts under the controversial long-term incentive plan, with three bosses collectively eventually agreeing to hand back about £50 million in bonuses to quell the mounting anger.
The pay controversy led to the resignation of chairman Nicholas Wrigley and former remuneration committee chair Jonathan Davie late last year.
In a bruising encounter with MPs on the Business, Energy and Industrial Strategy Committee, Ms Sears was blasted for failing to know the average worker’s pay at Persimmon, while chair Rachel Reeves branded the group’s pay awards “egregious”.
When asked what lessons were learned from the pay debacle, Ms Sears – who took on the role after the pay deals were secured and amid the mounting row – said that there should be “remuneration discretion for undesirable outcomes” on pay.
She said: “We would have handled it better if we’d had earlier and better communication with shareholders.
“It was right in the end, but it was late.”
She added: “We had an incentive scheme that was a contractual entitlement without any discretion or cap.
“The company did very well – it was a stunning business performance, but it gave rise to a total shareholder return and share price performance that resulted in sizeable outcomes for executives.”
The group has come under particularly heavy criticism for allowing such awards given that its performance has been boosted in recent years by the Government’s Help to Buy scheme for first time buyers.
Clare Chapman, remuneration chair of engineering group Weir, was also questioned at the hearing and taken to task for failing to know the total annual pay for Weir’s chief executive.
She said Weir’s new pay executive plans had been voted for recently by shareholders after detailed discussions with investors in advance.
She added: “It’s the responsibility of remuneration committee chairs to make sure you never pay a penny more than is needed.”
But Labour MP Peter Kyle questioned why it was that “executives are better on pay negotiation than you are as remuneration committee chairs?”.
MPs also asked whether remuneration committee chairs are “spread too thinly”, given that many hold multiple non-executive directorships.
Ms Sears said she had been working “nearly full-time” on the pay issue at Persimmon up to its April annual general meeting, although she holds posts at other firms, including homewares firm Dunelm.