Per­sim­mon has shown its over­paid boss the door, but has the penny re­ally dropped?

The Observer - - Analysis -

So farewell, Jeff Fair­burn, prob­a­bly the most egre­giously over­paid boss in mod­ern cor­po­rate his­tory. Last December, Fair­burn, boss of the house­builder Per­sim­mon, was handed a £100m bonus from a badly de­signed long-term in­cen­tive plan (LTIP) set up in 2012.

That mor­phed into a win­ning lot­tery ticket when Ge­orge Os­borne un­veiled his help-to-buy scheme in 2013, backed by bil­lions of pounds of tax­pay­ers’ cash. It put rocket fuel into new house sales, and house­builders’ prof­its. The Per­sim­mon share price had risen five­fold when the LTIP ma­tured last Christ­mas.

The then-chair­man of Per­sim­mon and the di­rec­tor who signed off the LTIP tried to per­suade Fair­burn to take a smaller sum and do­nate a large por­tion to char­ity. He re­fused. They quit. The en­su­ing furore per­suaded Fair­burn to forgo £25m. Too lit­tle, too late. He promised to set up a char­i­ta­ble trust. When? How much? He wouldn’t say.

Last month, when a BBC re­porter asked him about the pay­out, Fair­burn stomped off, telling the jour­nal­ist it was “un­for­tu­nate” he had asked that ques­tion.

Last week, at long last, Per­sim­mon re­alised that Fair­burn had done last­ing dam­age to the com­pany’s rep­u­ta­tion and he was shown the door.

There are lessons from this saga: all in­cen­tives should have a max­i­mum pay­out; LTIPs that gen­er­ate cash from ex­ter­nal fac­tors – like help-to-buy – are a re­ward for luck, not per­for­mance; share­hold­ers should wake up and re­alise the dam­age done to busi­ness by ex­ec­u­tive greed (more than half of Per­sim­mon share­hold­ers backed this pay­out even amid the furore).

Per­sim­mon will now be linked with ex­ec­u­tive ex­cess for years. To es­cape the Fair­burn stain it may have to change its name. But has the penny prop­erly dropped, even now? Be­cause the in­terim boss, David Jenk­in­son, got £40.5m from that LTIP. But for Fair­burn, it would have been Jenk­in­son be­ing branded as one of the UK’s greed­i­est bosses.

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