A pay deal for the chief executive of the UK house builder Persimmon, worth roughly £75 million ($104 million), has landed it at the center of a controversy. The investors of the company were furious and stopped just short of a revolt.
The approval for the controversial 2017 pay package for Persimmon executives including CEO Jeff Fairburn was passed with just over 51 per cent of shareholders voting in favor. And despite agreeing earlier to reduce the pay packages ahead of the shareholder voting, the company has been heavily criticized in relation the size of the planned paychecks.
It was agreed earlier in the year that the proposed compensation package for Fairburn would be reduced to £75 million from the planned £110 million ($153 million). A fair part of the compensation was also pledged to be donated to charity by Fairburn. However, the company has not disclosed the recipients and the size of those charity payments.
The original planned payouts, which were tied to performance but not capped, were excessive, the company admitted on Wednesday.
At the company’s annual meeting on Wednesday in the United Kingdom, unreserved apology was tended to the shareholders by Nigel Mills, the interim chairman of Persimmon.
“This could have all have been handled better,” he said. “Indeed it should have been.”
There was hardly anyone in the company who could have accurately predicted that the performance of the company “would be so good over such a long period of time,” Miller said while also acknowledging that the company should have capped the bonus scheme as well.
Fairburn has been made the top paid CEO in Britain by a long way as the revised pay package was passed by shareholders who voted 51.5% to 48.5% in favor.
A new taxpayer-backed scheme that enhanced the demand for new homes was largely to be credited for the Persimmon’s strong performance and hence the bonuses were undeserved, critics have argued.
Voting against the pay package was Aberdeen Standard Investments that represents those shareholders holding rights to about 2.3 per cent of shares of the company’. It said that a reduction of the pay package from £110 million to £75 million “does not even get close to acceptable.”
Being a chief executive “requires a personal motivation that goes beyond simply amassing a fortune,” said Euan Stirling, the head of stewardship at Aberdeen Standard Investments.
“The long-term success of the company is being endangered by the reputational damage associated with grossly excessive pay,” he added in a statement before the vote was taken.
“We must now look to put this issue behind us and to enable the business to be recognized once again for its exceptional performance,” Mills said in a statement after the vote.
(Adapted from Money.CNN.com)