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Persimmon: Lessons from jilted Jeff

Tom Fitzpatrick

Jeff Fairburn has been sacked (or ‘asked to resign’) for taking a ludicrous bonus by the company that gave him said ludicrous bonus.

He is the target of public scrutiny, rightly, because a pay packet of £100m is absurd at any time, let alone in the midst of a housing crisis.

His response was mealy-mouthed as criticism grew – a lot of which may have died down had he just acknowledged that not only would the issue not go away, but people had a right to be offended by it.

Few if any of you reading this Briefing will be able to contemplate earning tens of millions in their lifetime, let alone what is turning into a £75m golden handshake (he volunteered a £25m cut).

But how much of this is due to greed and how much is due to Britain’s boardroom culture – particularly among the listed volume housebuilders?

From reports of faulty homes and the ground rent scandal, to corruption allegations and the sector’s response to Grenfell, the public’s trust in the housing sector appears to be at a low ebb.

This is at a time when housing providers who benefit from public incentives like Help to Buy are under pressure to deliver increased volumes, yet still seem unable to make a significant dent in the nationwide shortage.

While this isn’t necessarily the fault of housebuilders, it doesn’t play well with the general public.

It also lends weight not only to the need for more local authority / housing association building, but also to the build-to-rent sector, which is increasingly sophisticated and marketing itself to people put off homeownership.

The image of a man receiving this amount of money for hitting targets set by his board jars with the need to create a new housing story, where having rich parents or giving up avocado on toast seem to be the only ways for most people to afford a house.

Persimmon comes out of this badly, due in no small part to the way it has handled everything since it set the 2012 incentive plan behind Mr Fairburn’s bonus.

Blame can be widely attributed, from the people who signed off on this plan to the media ‘handler’ who interrupted a BBC reporter’s question to Mr Fairburn about the bonus (which seems to have been the final nail in his coffin).

Housing matters. Infrastructure matters. If you want to be a CEO of a company in the built environment, not only should you be prepared for public scrutiny, but the board around you should be too.

The people running these businesses that are responsible for putting roofs over people’s heads (or not, as the case may be) have a moral responsibility to do the right thing, and that means setting appropriate parameters on payment against performance.

Jeff Fairburn is entitled to a bonus and some of the opprobrium coming his way is less about the bonus and more about his impression of a cat that got the cream.

But when homelessness is rife, when people can’t afford mortgages, when building rates fall short despite government stoking demand (and profits) with Help to Buy, the leaders of these businesses must come under greater scrutiny.

A decade ago, major housebuilders including Persimmon were struggling as the global financial crash took its toll. In the first six months of this year, Persimmon made £516m.

The market is cyclical. Persimmon needs to remember how to both win and lose gracefully.

Readers' comments (3)

  • Everyone is an expert after the event.

    When the credit crunch was biting hard businesses were facing ruin and the loss of jobs for them and their supply chain was very real.

    At the time the bonuses were set the shareholders would have the same opportunity to scrutinise the deal as they do now. No doubt at the time, the shareholders were desperate not to lose their holdings they would be glad if anybody could steer the ship into calmer waters.

    This Persimmon has done, and Jeff Fairburn is entitled to what has been agreed to.

    This issue here has been conflated, what Mr Fairburn has received should not be judged in the context of what is now, in the current climate, socially unpalatable.

    The insinuation that Persimmon have got rich on the back of public money i.e.’ Help to Buy’ is cynical and narrow minded. Houses need building, Persimmon is a house builder, and people chose to buy a house from Persimmon using HTB.

    Isn’t a sign of our age that footballers in the premier league regular amass the same wealth that Jeff Fairburn and Persimmon have done and nobody ‘batts an eyelid’. Yet I am sure that Persimmon provides a greater return for the wider economy, than football clubs do.

    Persimmon could have handled the PR better, but still, this affords journalists the opportunity to knock successful business and take the populist social view.

    Greed is a funny thing: when people are successful and prosper by it, they are called greedy by those that envy them. The envious I am sure would love to switch places; but how many would give away £25 million of their entitled bonus?

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  • "The insinuation that Persimmon have got rich on the back of public money i.e.’ Help to Buy’ is cynical and narrow minded."

    No it isn't. The fact still remains that the payment is appallingly excessive AND paid in part by public money from HTB

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  • Persimmon's profits - upon which Jeff Fairburn's bonus was based - were massively inflated by the Government's Help to Buy scheme, which was introduced a short time after the Persimmon board fixed his profit targets.
    It is said that they are able to charge more than 10% extra for the new builds compared to the market rate when Help to Buy is available.
    It is absolutely not cynical to say they and Mr Fairburn have benefited from this and it might have been better if the Government had introduced an excess profits tax in this situation.
    Also perhaps the Persimmon board (and other house builders too) need to ensure that a condition is included in profit based executive incentive schemes where there is a methodology to re-calculate the bonus when the excess profit is as a result of a windfall due to changes of legislation and similar factors.

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