Persimmon AGM Voting Recommendations

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

ShareSoc has issued the following press release:

ShareSoc is opposed to the Remuneration Policy of Persimmon Plc. We therefore recommend VOTING AGAINST the Persimmon AGM resolutions as follows: Remuneration Policy (Resolution No. 2), Remuneration Report (No. 3), Remuneration Committee Chair Jonathan Davie (No. 8) and the 2017 Performance Share Plan (No. 14).

How can the Remuneration Report almost completely ignore the existing LTIP awards? There is no mention of the £100 million share scheme for Persimmon CEO Fairburn in the new remuneration policy, other than to say that the previous 2012 plan will most likely vest in full before 31 Dec 2017.

Persimmon have adopted a pathetically inadequate share ownership guideline of 200% of salary. This means the CEO is able to sell all but £2million of his shares whenever he likes. Where is the alignment with shareholders in this approach? How can shareholders be sure that he will be retained and motivated? These points are not discussed in the Remuneration Report, which lamentably fails to get to grips with the key issues of motivation, alignment and succession. The contrast with Berkeley Group is stark.

Persimmon should require executive directors to hold their shares until 2 years after they leave. Such time will enable any legacy issues to show through before the executives cash in their shares. That is the best way to create alignment with shareholders.

The new remuneration policy is a plain vanilla one, with a maximum bonus of 200% salary for the CEO and a performance share plan (LTIP) giving up to 200% of salary (or 300% in some circumstances). ShareSoc considers these ratios to be excessive. ShareSoc’s Remuneration Guidelines suggest these levels should be halved.

The special circumstances of this highly successful company surely require more creativity than this anodyne plan. If the previous plan, which was billed as a ten year plan was so successful, then why was not a similar plan considered again? Although we are opposed to the quantum of payout, there are a number of good points in the structure of the previous plan, which are not included in the new plan.

Last year ShareSoc criticised the increase in the pension allowance to 24% salary, which seemed totally unnecessary in view of the upcoming £100 million share plan bonanza. Sadly this year we see no reduction in the pension allowance for the current directors, although there is a sop: new directors will receive the same level of pension as other employees. It is a pity that the existing directors did not step up to the plate and volunteer to drop their enhanced pension. This is just unnecessary icing on the cake, excessive greed and deserves all the criticism that can be levied!

Roger Lawson

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