As I See It
A lack of humility is a lesson in failure
When asked by a television reporter about his mega-bonus, Persimmon CEO Jeff Fairburn’s embarrassing silence had viewing PR professionals tearing out their hair in disbelief at what they were witnessing.
Whether it was lack of preparation for the obvious question, or just an inability to think on his feet, Mr Fairburn was made to look aloof and uncaring about the public’s disapproval of anyone receiving a £75 million bonus.
He has now lost his job because his performance in front of a watching nation only added to the company’s humiliation over a controversy it has been unable to shake off.
A straightforward explanation justifying the payment may have been enough to satisfy the reporter, and the interview would not have been seen outside Yorkshire where it took place. Instead he chose to walk away and was heard to say, “I think that’s really unfortunate actually that you’ve done that.”
Clearly, Mr Fairburn thought it was an inappropriate question. Not so. It was an inevitable question and his first media training session ought to have instilled in him a little humility.
As property specialist Henry Prior said: “This was Fairburn’s Icarus moment. He flew too close to the sun, like Fred Goodwin, and it has ended in disaster. He lost the confidence of shareholders and the goodwill of the public…This is a PR cock-up.”
It was, as they say, a disaster waiting to happen, given that there had been considerable indignation and opposition to this payout for some months. Speaking ahead of Persimmon’s annual general meeting in April, Euan Stirling, head of stewardship at Aberdeen Standard Investments, which owns a stake in the York-based FTSE 250 company, said the reduction of Mr Fairburn’s bonus from £100m to £75m “did not even get close to acceptable”.
Mr Stirling warned that the “reputational damage associated with grossly excessive pay,” endangered the company’s long-term success. The board has finally taken this on board and “requested” that Mr Fairburn step aside for the good of the company. Of course, he had no hand in the decision to pay him such a humungous bonus, but having failed so miserably to defend it there was no option left for the Persimmon board to take.
His exit comes a year after the departure of the company’s chairman Nicholas Wrigley and the head of the remuneration committee Jonathan Davie who accepted responsibility for failing to include any cap on the long-term incentive plan agreed in 2012 which created the issue in the first place.
Persimmon will now be hoping this embarrassing episode is finally put to bed. As Russ Mould, investment director at AJ Bell, points out, the irony to all this is that Mr Fairburn leaves a business in good shape, with the accompanying third quarter trading update suggesting it is on track to hit full year forecasts.
Group managing director David Jenkinson will fill in while the company hunts for a permanent successor to Mr Fairburn. Corporate governance analysts will keenly scrutinise the new incentive scheme for reassurances that the board has learned its lesson.