A bonus structure which could net management at house builder Persimmon £600m over the next five years has been criticised by investors.
Mike Fox, from Royal London Asset Management, told the BBC the payments were too high “in all circumstances” and called on the board to show restraint, given government support for the house building industry and the shortage of housing supply.
The scheme is believed to be one of the largest ever at a FTSE 100 company outside banking, with the biggest beneficiary, chief executive Jeff Fairburn, potentially earning more than £100m.
The bonus system was introduced in 2012. Since then, Persimmon’s share price has climbed from 620p to just under 2,000p.
Royal London Asset Management, which holds shares in Persimmon worth £26.3m, voted against the deal at its inception and in every year since. Fox, who is head of sustainable investment, said: “Any board operating a housing company should ask itself the wisdom of making an award of that scale in that context, even if that award is justifiable.”
A statement from Persimmon said: “This is a long-term plan that runs for almost a decade which is designed to drive outperformance through the housing cycle and to incentivise the management to deliver the capital return, grow the business and increase the share price. Unlike many other schemes, it extends to around 150 executives.”
Persimmon is the UK’s largest house builder by volume.
Incentives seem to outgrow true performance values in our society. More of this money should be set aside to offer affordable housing rather than award this level of “bonus “. It would be better to offer limited number of shares at a reasonable below market price and let these folk continue to do the good job they are already paid to do .