Persimmon chair resigns over £128m bonus
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The Chairman of Persimmon has resigned over his role in orchestrating a £128m bonus for the developers chief executive, Jeff Fairburn, that will begin paying out on New Year’s Eve. Bosses at the house builder will pocket more than £100m under its share award plan which was called “Long Term Incentive Plan in 2012 (“2012 LTIP”).
The controvesial bonus scheme believed to be the most generous ever in the UK is due to start paying out more than to 150 senior staff on 31 December . The payouts are linked to the company’s stock market performance, which has been massively boosted by the government’s help to buy scheme and are thought to total around £800m.
Persimmon’s share price has more than doubled since George Osborne introduced help to buy in 2013 and about half of the homes sold last year were to help to buy recipients, meaning that government money helped finance the sales of these homes therefore in turn government money is seen to have subsided the £128m bonus.
The pay deal, which was put in place in 2012, has been widely criticised by politicians, charities and corporate governance experts the Guardian had contacted this week.
Vince Cable, the leader of the Liberal Democrats, commented saying “scale of this bonus is obscene” and built on a “government subsidy”.
“It is reminiscent of the worst excesses of corporate greed that helped to create the financial crisis, when short-termism was heavily incentivised and long-term planning ignored,” he said.
“This is a also a perverse situation where corporate fortune has been built on what is essentially a government subsidy in help to buy. This situation shows just why help to buy is so flawed: it fuels demand rather than supply, putting house prices even further out of reach of young people, while adding zeros to the bank balances of housebuilding executives.”
“The board believes that the introduction of the 2012 LTIP has been a significant factor in the company’s outstanding performance over this period, led by a strong and talented executive team.
“Nevertheless, Nicholas and Jonathan recognise that the 2012 LTIP could have included a cap.
“In recognition of this omission, they have therefore tendered their resignations.”
Senior Independent Director and Chairman of the Remuneration Committee Jonathan Davie has also resigned as the company said it should have capped payouts.