Persimmon kicks out £76m CEO Jeff Fairburn

Jeff Fairburn

York-based housebuilder Persimmon said its chief executive Jeff Fairburn is to leave the company because criticism of his £76 million bonus package was a continuing distraction that had harmed the firm’s reputation.

Fairburn’s total bonus package was originally worth more than £100 million, dependent on the firm’s share price, but was cut back this year to roughly £76 million after media and shareholder criticism.

“Persimmon plc announces today that by mutual agreement and at the request of the company, Jeff Fairburn, group chief executive, is to step down,” said Persimmon.

“Jeff has been a successful leader of the business since his appointment in 2013, but the board believes that the distraction around his remuneration from the 2012 LTIP scheme continues to have a negative impact on the reputation of the business and consequently on Jeff’s ability to continue in his role.”

David Jenkinson, currently group managing director, will be appointed as interim group chief executive on December 31, 2018, when Fairburn will leave the company.

The Persimmon board has commenced a formal process to select a permanent successor.

One of Persimmon’s shareholders, Aberdeen Standard Investments, welcomed Persimmon’s decision.

“Persimmon’s reputation has been tarnished by issues around Jeff Fairburn’s pay,” said Euan Stirling, head of stewardship and ESG Investment, Aberdeen Standard Investments.

“We welcome the action taken by the board and we will continue to engage with the company in order to help, where we can, with the restoration of the company’s standing.”

Persimmon chairman Roger Devlin said: “Under Jeff’s leadership Persimmon has sold more than 74,000 homes across the UK while more than doubling in size, increasing its market capitalisation from £3.4 bn to £7.5 bn, returning over £2.2bn to shareholders and producing industry leading margins and returns on capital.

“However, given the continuing distraction around the scale of his remuneration resulting from the 2012 LTIP, the board believes that it is now necessary for there to be to be a change of leadership.”

Fairburn said: “I had hoped that revealing my plans to create a charitable trust and to waive a proportion of the award would enable the company to put the issue of the 2012 LTIP behind it.

“However, this has not been the case and so it is clearly now in the best interests of Persimmon that I should step down.”

Persimmon added the following statement on remuneration arrangements:

“On 6 November 2018, Jeff and the Company agreed to the terms of a Settlement Agreement whereby his employment will end on 31 December 2018.

“The arrangements in relation to Jeff’s entitlement under the 2012 LTIP satisfy his contractual entitlement; the Remuneration Committee has not exercised any discretion in his favour.

“Following the surrender of options announced on 23 February 2018, the second and final vest of all remaining options to all participants in the 2012 LTIP occurred in full on 2 July 2018.

“The extension of the holding period applying to 50% of Jeff‘s remaining second vest shares (after payment of tax) included a requirement that Jeff not resign from employment with Persimmon and these shares were voluntarily pledged as security against his commitment to stay with the business (the “restricted” shares).

“Whilst the Company has sought to mitigate the entitlement falling due to Jeff, as Jeff is leaving at the Company’s request, legal advice has confirmed that the Company does not have any discretion to withhold or seek forfeiture over any of the “restricted” 2012 LTIP shares, although these continue to be required to be held until 6 July 2021.

“The Company has agreed with Jeff to reduce his 12 month notice period and therefore there will be no further payments of salary or provision of benefits (including pension) after 31 December 2018.  Jeff has no bonus entitlement for 2018 and no awards under any of the Company’s share plans other than his deferred bonus share scheme awards and unvested SAYE options, which will lapse on departure.

“David Jenkinson’s remuneration terms will not change on his appointment to interim CEO. 

“The Company has today separately announced a scheduled trading update for the period from 1 July 2018 to 6 November 2018.

“Further details of the remuneration arrangements relating to Jeff’s exit from the business have been included on the Company’s corporate website in accordance with section 430(2B) of the Companies Act 2006.”