November 7, 2018 / 7:16 AM / 14 days ago

Backlash over $100 million bonus claims boss of UK builder Persimmon

LONDON (Reuters) - The boss of Britain’s second-biggest housebuilder Persimmon (PSN.L) is to leave after the company said criticism of his $100 million (75.95 million pounds) bonus package was a continuing distraction that had hit its reputation.

FILE PHOTO: Builders construct modular Space4 homes on a Persimmon development in Coventry, February 22, 2017. Picture taken February 22, 2017. REUTERS/Darren Staples/File Photo

Jeff Fairburn was the highest paid FTSE-100 chief executive in the financial year ending 2017, receiving 47.1 million pounds, more than 20 times his pay in 2016, largely due to a long-term incentive plan dating back to 2012.

His total bonus package was originally worth over 100 million pounds, dependent on the firm’s share price, but was scaled back this year to roughly 75 million pounds ($100 million) after intense media and some shareholder criticism.

He had hoped to draw a line under the issue with plans to set up a charitable trust, but just a few weeks ago Fairburn hit the headlines again when he refused to answer questions in a broadcast interview about the size of his pay packet.

“It is clearly now in the best interests of Persimmon that I should step down,” he said.

Excessive corporate pay has sparked public outrage in Britain since the 2007-8 financial crisis and politicians have denounced the yawning gap between the pay of bosses and workers.

Fairburn’s pay was way above the average for top CEOs, which stood at 5.7 million pounds in their 2017 financial year, according to the Chartered Institute of Personnel and Development and the High Pay Centre think tank.

Full-time employees in Britain were paid just less than 30,000 pounds on average in 2018, according to official data.

‘WARNING TO OTHER COMPANIES’

Fairburn, who has been in the business for 29 years, is due to leave the company on Dec. 31 and will be replaced on an interim basis by Group Managing Director David Jenkinson while the board finds a permanent successor.

He became CEO in 2013 as many builders began their strong recovery from the financial crisis and subsequent recession, with the firm more than doubling its market capitalisation to 7.5 billion pounds during his tenure.

In April, a shareholder vote narrowly backed the housebuilder’s pay scheme by 51.5 percent of votes cast to 48.5 percent against, whilst some 31 percent abstained.

But last month a clip of Fairburn refusing to answer questions about his bonus was widely shared on social media.

“Given the continuing distraction around the scale of his remuneration... the Board believes that it is now necessary for there to be to be a change of leadership,” said Persimmon Chairman Roger Devlin.

The director of the High Pay Centre said the “whole saga will be a warning sign to other companies contemplating such excessive payouts,” while adding that shareholders had failed in their role to police excessive pay.

“We need more democratic models of company oversight with a much stronger role for the workforce,” said Luke Hildyard.

Some housebuilders have faced criticism for their bosses’ remuneration packages and bumper profits which have been helped by a government ‘Help to Buy’ scheme, which offers buyers the ability to purchase a new-build home with a small deposit.

But Persimmon continues to post strong results, saying on Wednesday that sales since it reported half-year results on Aug. 21 were up 3 percent.

Shares in the company were up 1.4 percent at 0950 GMT.

($1 = 0.7625 pounds)

Reporting by Costas Pitas in London; Editing by Kate Holton and Mark Potter

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