Persimmon’s pig-headed boss has had plenty of chances to do the right thing over the £75m bonus that embarrassed the industry
Farewell then to Jeff Fairburn, the housebuilding supremo with concrete ears. Persimmon’s pig-headed boss has finally been ousted after refusing to cave in to fierce pressure over his obscene £75m bonus. He won’t be missed. His departure caps one of the most embarrassing episodes in UK corporate history. Fairburn should never have been awarded such an outrageous amount.
The decision not to cap the bonus scheme was a monumental oversight from a board that was in a rush to hand out juicy rewards to its top executives for building a few thousand houses.
Shareholders too must take their share of the blame for blindly waving through such an ill-conceived scheme. Without a cap, the company was utterly powerless to claw back any of the generous scheme once it became clear that senior managers were in line for a king’s ransom.
Still, Fairburn had a choice. Although it was reduced from £131m to £75m, he could have handed back the majority, rather than just some of the money, or given it to charity. Instead, he chose to keep it and went into hiding, leaving chairman Nicholas Wrigley and head of remuneration Jonathan Davie to be sacrificed.
Fairburn told colleagues the payout had been earned. It’s true that Persimmon has been a remarkable success story, establishing itself as a market leader in affordable homes, with a share price that would be the envy of most bosses.
These points are irrefutable but he conveniently forgets one important factor: the contribution of the Government’s Help to Buy scheme, which has put a rocket under profits and is responsible for 60pc of Persimmon’s sales.
This was an executive team that won the lottery on the back of a share price juiced up by state subsidies. In the same way that chief executives are fond of saying they can’t control the share price when it goes down, the same argument can be applied when it goes in the opposite direction.
But Fairburn either didn’t understand the public mood, or, worse, simply didn’t give a toss. Yes, technically, the bonus was owed but the country is in the throes of a housing crisis. Pocketing a whopping bonus when many first-time buyers cannot get on the housing ladder, and homelessness is spiralling, looks both insensitive and greedy.
His arrogance has been deeply damaging for the housebuilding industry. Rivals have been left exasperated at a giant political own-goal that has handed a gift to a Labour Opposition determined to eradicate high pay and come down hard on private housebuilders over the shortage of homes.
Fairburn whined that it was no one’s business, as if he were employed by a Mayfair hedge fund or Wall Street private equity house. In reality he ran a large public company that has benefited hugely from taxpayer support. Unfortunately that means having to answer uncomfortable questions, particularly when you’re refusing to part with such an obscene sum.
Fairburn wasn’t even up to that. The one time he was quizzed was a total disaster. An online clip of the car-crash interview with a BBC reporter was watched more than a million times, proving beyond any doubt that the public wanted proper answers.
The incident proved to be Fairburn’s undoing. New chairman Roger Devlin had come in with an open mind but it was clear to even a disinterested bystander that Persimmon’s reputation was in shreds, and the loss of customers was a very real risk. Morale was starting to suffer too.
Fairburn was even allowed one final shot at redemption by forgoing some of the remainder of the bonus – roughly £50m – that he still stands to collect, an offer that was entirely undeserved. He declined. Faced with such intransigence, Devlin had little choice.
Although the company is powerless to claw back any more of Fairburn’s bonus, it has managed to wriggle out of a pay-off – a small consolation at least.
It is almost certain that Fairburn won’t get another job at a public company but then he won’t need one. Aged 52, a gilded retirement awaits. Still, he leaves a legacy of sorts: the end of uncapped bonus schemes. No board worth its salt will make such a colossal mistake again.
‘His arrogance has been deeply damaging for the industry’