There’s a new hero in town. It was a mesmerising moment when Euan Stirling, of Standard Life Aberdeen, stood up, looked Persimmon boss Jeff Fairburn in the eye and delivered a full-throated denunciation of the latter’s £75 million bonus package.
Stirling’s attack has seriously upped the ante for Fairburn.
The Standard Life man argued that Fairburn’s conduct is not merely distasteful or immoral, but quite possibly in breach of legal responsibilities as a director.
Pay scandal: Jeff Fairburn has turned the name of a previously admired housebuilder into a synonym for shameless corporate avarice
Under Section 172 of the Companies Act, Fairburn, like any director, has a duty to promote the long-term interests of the firm.
That means having a care for the company’s reputation and nurturing relationships with suppliers, customers and employees – all of whom may well be miffed at the largesse at the building firm.
It doesn’t require a finely honed legal mind to see that Fairburn has a case to answer. His behaviour has served his own personal enrichment far better than it has served the company.
Ominously for the Persimmon chief, Stirling says he is very keen to hear an explanation of how the board will fulfil its legal obligations in future. In other words, he wants to know why on earth Fairburn deserves to stay in his job.
There is a simple answer to that: he doesn’t.
This is a man who has turned the name of a previously admired housebuilder into a synonym for shameless corporate avarice. Worse, this is a man who has not even had the good grace, or good sense, to apologise.
At least Paul Pester, the TSB chief who has been vilified for the computer systems meltdown at the bank, took out full-page advertisements to say sorry.
Fairburn has never apologised publicly and failed to take the opportunity afforded by the annual meeting to express even a scintilla of personal regret – he left it to the stand-in chairman to grovel on his behalf.
He is not the only person who comes out of this looking bad – so too do most of the investors with the honourable exception of Standard Life’s Stirling.
If they can’t get their act together to stop a scheme as ridiculous as Persimmon’s, one has to ask what can they do.
Stirling was a lone voice from the large institutions. Blackrock, the biggest investor, did not even bother to turn up to the meeting – perhaps a couple of hours’ train ride to York was all too much – and only managed a mealy-mouthed statement a day after the event.
Others didn’t even run to that. Such is the ingrained reluctance to confront excessive pay that a large number of shareholders abstained, rather than vote against a patently outrageous deal.
It’s worth remembering it has only paid out such large sums due to an accidental design flaw because no one remembered to put in an upper limit on the jackpot. It would be a farce if it were not so appalling.
The core problem is that shareholders don’t have enough power and most are too pusillanimous to use it when they do. Investors are perhaps conscious that shares have risen strongly under Fairburn’s tenure. Yet a large part of that is thanks to government schemes to promote homeownership and anyway, it’s not all about the share price.
Chief executives need to be capable of understanding broader concerns about their company’s reputation, beyond the bottom line and their own narrow self-interest. A stubborn and impervious boss with limited horizons is a liability, however brilliant he may be as a house-builder.
Investors need to wake up. Greedy, obdurate executives get away with it because spineless shareholders let them.
There is one penalty: Persimmon will shoot to the top of the Government’s list of shame for companies that have been censured for excessive rewards. Will that bother Jeff Fairburn? What do you think?