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