Jeff Fairburn, the chief executive of Persimmon, is facing questions from City investor over whether he has breached company law by insisting on taking a £75 million bonus.
In an astonishing attack at Persimmon’s stormy annual meeting, Euan Stirling, head of stewardship at Aberdeen Standard Investments, accused Fairburn and his fellow directors of having ‘endangered’ the company’s long-term success.
Stirling, whose firm owns 2.3 per cent of Persimmon, said that besides their moral duties, directors have ‘a legal responsibility to act in the best long-term interests of the company that employs them’.
Under pressure: Questions have been raised over Persimmon chief Jeff Fairburn’s pay in relation to Section 172 of the Companies Act
He was referring to Section 172 of the Companies Act which sets out directors’ duties in this regard.
‘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,’ he said, after accusing Fairburn of unacceptable pay that tarnished the reputation of Persimmon and the entire sector.
Stirling added that, ‘when directors act in contravention of their role to promote the best interests of the business’, they invite attention that will damage themselves and other firms.
City sources say Fairburn’s long-term future as chief executive is in doubt, though in the short-term he may stay put, as internal candidates who might have taken over are also receiving outsized packages. Hiring an untainted external replacement is likely to take longer.
Euan Stirling: Head of stewardship at Aberdeen Standard Investments accused Fairburn and his fellow directors of having ‘endangered’ Persimmon’s long-term success
The Persimmon boss has so far refused to apologise publicly for his conduct.
At Wednesday’s meeting held at York Racecourse, Fairburn confined himself to answering questions about the firm’s trading and left Persimmon’s acting chairman Nigel Mills to grovel to shareholders for the debacle.
In reply to Stirling, Mills said the company had taken extensive legal advice and added: ‘We fully understand our responsibilities. They have been heightened by the focus of this particular issue and we intend to address them fully.’
Fairburn refused to speak to the media after the event, again leaving Mills to field questions. Small shareholders also voiced their anger at the meeting. Andrew Ingleby called the bonuses ‘totally and utterly unjustifiable’ and said that even the sums already handed to the bosses were too much.
Another said: ‘I just can’t believe what is going on from a company like Persimmon. I realise the predicament they’re in but it needs a better answer than what we’re getting at the moment.’
Luke Hildyard, director of the High Pay Centre, told The Mail on Sunday: ‘Euan Stirling is absolutely right that companies aren’t just money-making operations on behalf of shareholders. They are major social institutions and players in the wider economy whose actions have repercussions.
‘This is something that’s set out in law in the Companies Act. Directors should act in the interests of their shareholders whilst also having regard for the interests of workers, suppliers, customers and the wider society.’
Spotlight: Mail on Sunday has piled on pressure over the Persimmon bonuses
Stephen Beer, chief investment officer at the Central Finance Board of the Methodist Church, which voted against the pay report, said: ‘Housebuilders went through a tough time in the financial crisis but since then house prices have benefited from low interest rates driven by the Bank of England and government policy.
The row over Persimmon’s pay comes when there is still considerable anger in society about inequality after the financial crisis. All companies need to be mindful that they do not set executive pay schemes in isolation from the rest of society.’
One small shareholder swam against the tide and expressed his gratitude to the board.
He said despite the ‘varying degrees of unease’ over the payouts, the company had been a ‘beacon of managerial excellence in the sea of mediocrity that is the UK corporate sector’. He urged shareholders to show their appreciation, which was followed by an awkward round of applause.
The Mail on Sunday revealed in November that the first £50 million of shares was due to be handed to Fairburn at the New Year. Our revelation sparked outrage at a time when Theresa May had pledged to crack down on fat-cat pay.
After mounting pressure, Fairburn eventually pledged to give an unspecified amount to charity before declining to take £25 million of his bonus, but he will still receive a total of around £75 million.
Two other executives will also be quids in. Chief financial officer Mike Killoran will receive around £50 million while managing director Dave Jenkinson is in line for close to £40 million.
The scandal surrounding the bonuses – which includes around 130 regional managers sharing in a pot of more than £600 million – forced the resignations of chairman Nicholas Wrigley and the remuneration committee chairman Jonathan Davie.
They admitted the scheme – introduced in 2012 before the Government’s Help to Buy scheme boosted housebuilders’ share prices – should have had a cap.
At the meeting almost half of shareholders voted against the pay report, which was narrowly passed thanks to 51.48 per cent of the votes actually cast. Many shareholders abstained, meaning only 36 per cent of all votes backed the payouts.