Mega payouts lined up for Persimmon executives due to an unfettered bonus scheme have been reined in, the housebuilder has confirmed.
After drawing criticism from a range of quarters for the scheme, which had promised a number of executives bonuses amounting to tens of millions of pounds following strong performance, the next tranche will be halved upon vesting.
CEO Jeff Fairburn and CFO Mike Killoran have reduced their overall entitlement to 50% of the shares due when the group has returned 620p per share in cash to shareholders. Group MD Dave Jenkinson has agreed to a similar deal.
The cut will see Fairburn give up some £30m, according to the Financial Times.
Persimmon chairman Nicholas Wrigley and remuneration committee chairman Jonathan Davie resigned in December 2017 after admitting that the bonus payouts should have been capped in its 2012 LTIP (long-term incentive plan).
Earlier this month Redrow chairman Steve Morgan said the bonus scheme was “very, very wrong”. In January, Fairburn said his bonus was an “important driver” in the company’s performance, and he has committed to make a significant donation to charity. The company’s growth aligned with the impact of the government’s Help-To-Buy scheme upon housing sales.
Persimmon reiterated the importance of the bonus scheme to its strong performance in today’s bonus update to the stock exchange.
“The board believes that the LTIP put in place in 2012 has been a significant factor in the company’s outstanding performance. In particular, it has contributed to industry-leading levels of margin, return on assets and cash generation.”
However, it admitted that a cap was a significant oversight.
It said: “Nonetheless, it is clear that the absence of a cap, in recognition of which the chairman and former remuneration committee chair offered their resignations from the board on 14 December 2017, has given rise to the potential for pay-outs which, when triggered in full, will be significantly larger and paid earlier than might reasonably have been expected at the time the scheme was originally put to shareholders.”