Edinburgh investor unhappy with deal
Persimmon CEO’s pay gesture ‘not enough’ says ASI
Persimmon: under fire over excessive pay to directors
Aberdeen Standard Investments (ASI), a top shareholder in house builder Persimmon, today claimed that its chief executive’s voluntary pay cut “does not even get close to acceptable”.
Euan Stirling head of stewardship at ASI, said the company would be voting against the remuneration package even though CEO Jeff Fairburn had offered to accept £75m rather than the £110m he was entitled to receive under various incentive schemes.
Speaking at today’s Persimmon AGM, Mr Stirling said: “My colleagues and I have spent a great deal of time in recent months meeting with executive and non-executive directors of Persimmon to discuss the enormous sums due to accrue to the three most senior executives under that plan.
“And while we do appreciate the concessions made by the chief executive, the reduction in the amount accruing to him from £110m to £75m does not even get close to acceptable.”
He said many newspaper column inches have been filled in an attempt to apportion blame for the situation and questioned where the blame should be apportioned, noting the role of shareholders, government schemes supporting the housing market, and the board of the company.
“In a sense, all have played a part but to continue to focus on the past risks missing an important point. What is clear is that in 2012, no-one expected Persimmon’s name to be tarnished by the payment of such excessive amounts,” said Mr Stirling.
“The important point I referred to is that regardless of any moral or societal duties, company directors have a legal responsibility to act in the best long-term interests of the company that employs them.
“Today’s remuneration results suggest that the executive directors at Persimmon have lost sight of that because the long-term success of the company is being endangered by the reputational damage associated with grossly excessive pay.”
He said that being a company director requires a personal motivation that “goes beyond simply amassing a fortune”.
He added: “It requires an understanding of where the company sits within the society within which it operates. Little of that is evident currently at Persimmon.
“And while the majority of UK directors diligently pursue the majority of their objectives successfully, Persimmon is clearly not alone. A casual flick through most days’ business pages can point to a number of corporate scandals and departures.
“And there is a danger to this.
“A common complaint from businesses relates to the interference of outside parties, such as politicians and regulators, who create bureaucracy and obstacles to value generation.
“Unfortunately, when directors act in contravention of their role to promote the best interests of the business, they are inviting more external attention which will affect not just them, but all of their corporate peers.
“There have been changes in board personnel at Persimmon in recent months. We welcome those changes as necessary and positive. We also recognise the enormous efforts of existing non-executives to try to improve the current situation.
“However, we remain very keen to hear the board’s explanation as to how, in the current situation, it is fulfilling its legal obligation to promote the long term success of the company, taking into account all stakeholders.”
Aberdeen owns 7.1 million shares in Persimmon, representing 2.3% of the company’s shares in issue.