Day of reckoning for £130m Jeff
THE incentive scheme at Persimmon, which is so bloated it would make even a banker blench, makes me wonder what pay packages like this are for. Up to a certain degree, pay is purely about being able to afford material necessities.
Above that, it starts to be a yardstick of status and respect, until it becomes self-defeating.
There comes a point – maybe it should be called the Persimmon Point – where pay is so obscene it is no longer a marker of esteem, but the opposite: It tips over into making the recipient an object of ridicule and contempt.
There is a similar effect with knighthoods. What was the purpose of Fred Goodwin clinging doggedly to his, when all the deference that is supposed to accompany it had drained away long since?
James Crosby, one of the bosses of HBOS at the time of its downfall, had the wit to recognise this and surrendered his knighthood voluntarily, sparing himself a lot of the vilification piled on Fred.
But back to Jeff Fairburn, the chief executive of Persimmon who is in line for £130 million under the company’s insane incentive plan.
He resisted calls to give up some of his payout for weeks, making himself look mulish and greedy before finally saying he would give a chunk to charity.
He deserves credit for doing so, but rather than making a personal apology, he issued a stilted statement that was short on detail and sounded selfjustificatory.
Fairburn may well be a decent man, as his supporters say, who planned to give a large sum to good causes all along.
But he has put himself into the ‘Ratner’ category of bosses who embody corporate scandal or misfortune, after Gerald Ratner who called his own jewellery ‘c**p’.
Others include Bob ‘The time for remorse is over’ Diamond, who personified the toxic bonus culture at Barclays, and Tony ‘I want my life back’ Hayward, who was in charge of BP at the time of the Gulf of Mexico oil spill.
Whether it’s fair or not on a personal level, bosses such as these are a flashpoint and a liability.
No one looks at Fairburn and thinks: ‘Wow, he’s worked wonders on earnings per share, I really admire his achievements.’ They look at him and see an emblem of excess.
This isn’t just a question of envy, it is a serious concern for shareholders because it has hurt Persimmon’s reputation. It could hamper the firm’s ability to drive a hard bargain when it is doing deals, because suppliers and others will assume that, if it can afford to pay such sums to its managers, it can afford to pay them plenty too. Similarly, it might be difficult to deal with wage demands from its own staff in future.
And mightn’t a first-time buyer be inclined to purchase from another builder, rather than enrich the Persimmon bosses even further?
Fairburn may be a very capable housebuilder but he is not a business superstar. And let’s not forget his lieutenants: Mike Killoran, the finance director, is in line for £82 million from the scheme.
Dave Jenkinson, another senior executive, could receive £45 million, enough to put the worst-paid of the trio at the top of the FTSE 100 pay league on a par with Sir Martin Sorrell.
Fairburn and Killoran have pledged to make big charitable donations but this disgusting pay scheme remains in place.
Plenty of pertinent questions remain unanswered in this mad episode, including how much Fairburn has donated – and precisely how much his bonuses are inflated by taxpayer subsidy. He is refusing to give any answers.
Perhaps Rachel Reeves, who chairs the business select committee, would like to call him in front of MPs to explain and to say sorry properly.
Fairburn has fallen into the “Ratner” list of bosses who embody mishaps