Persimmon's top three slash their own bonuses

Persimmon announced amendments to its 2012 Long Term Incentive Plan entitlements on Friday, affecting CEO Jeff Fairburn, CFO Mike Killoran, and group managing director Dave Jenkinson.

The FTSE 100 housebuilder’s incentive plan had come under intense criticism late last year, after it was revealed the top three executives were in line for a share of £200m, with the top 150 managers reportedly receiving incentive packages totalling £800m.

Under the terms of the 2012 LTIP, which was approved by 84.9% of shareholders voting at an extraordinary general meeting, Persimmon said rewards for the 133 participants vested in two tranches.

The first of those, worth 40% of the total and vested on 31 December 2017, will be capable of exercise from next week onwards following the announcement of the group's results for the year ended 31 December.

Persimmon said the second and final tranche, worth 60% of the total, would vest once the group has returned 620p per share in cash to shareholders, in line with the scheme rules.

The board said the three executives informed the remuneration committee of a series of decisions intended to reduce the scale of payments, and extend the holding period under any second tranche.

Jeff Fairburn and Mike Killoran were reducing their overall entitlement by a number of shares equal to 50% of the shares to which they would become entitled on the second vesting.

Additionally, they also decided to extend until 2021 the holding period applying to 50% of any shares under any second vest other than shares sold to cover tax liabilities.

Dave Jenkinson, meanwhile, reduced his overall entitlement by a number of shares equal to 50% of the shares subject to awards granted to him since being promoted to the board, to which he would become entitled on the second vesting.

In addition to the existing obligation to hold 50% of the shares from any second vest for 12 months, other than shares sold to cover tax liabilities, he has decided to extend until 2020 the holding period for 25% of such shares.

Persimmon said all three executives decided to cap the value of any future exercise of the remaining second vesting entitlement to a maximum value equal to £29 per share.

There would be no changes to the 2012 LTIP for other plan participants.

“The board believes that the LTIP put in place in 2012 has been a significant factor in the company's outstanding performance,” Persimmon’s board said in its statement.

“In particular, it has contributed to industry-leading levels of margin, return on assets and cash generation.

“Nonetheless, it is clear that the absence of a cap, in recognition of which the chairman and former remuneration committee chair offered their resignations from the board on 14 December, has given rise to the potential for payouts which, when triggered in full, will be significantly larger and paid earlier than might reasonably have been expected at the time the scheme was originally put to shareholders.”

It said the decisions by the executives had been “welcomed and fully supported” by the remuneration committee, which also noted Jeff Fairburn's intention to donate a substantial proportion of his total reward to charity.

“The board regards these decisions as an appropriate response by the executives.

“Accordingly, the board unanimously supports this amendment which it believes to be in the interests of the company as a whole.”