At this year’s AGM, held in April, 48.5% of shareholder votes were cast against the pay report, which sees chief executive Jeff Fairburn receive a whopping £75m.
But the UK Shareholders Association has accused asset managers that are only just jumping on the bandwagon of “grandstanding”.
“To come back and wring their hands and swipe out at senior management seems disingenuous,” said policy director Peter Parry.
Axa Investment Managers was the only asset manager out of the five-largest shareholders in 2012 who voted against Persimmon’s problematic long-term incentive plan (LTIP) introduced that year.
It said at the time, the LTIP did not incentivise management to create additional value for shareholders and instead rewarded management for distributing existing shareholder value.
In contrast, Aberdeen Asset Management (now Aberdeen Standard Investments), Blackrock, Legal & General Investment Management and Franklin Templeton Investments all voted the LTIP through.
Silence
Aberdeen Standard Investments, Blackrock, LGIM and Franklin Templeton all failed to respond directly to questions about their voting record in 2012.
LGIM and Franklin Templeton refused to comment on their votes at either the 2012 or 2018 AGMs as a matter of company policy.
Aberdeen Standard Investments told Portfolio Adviser they had no one available to comment, while Blackrock referred to its statement following the 2018 AGM.
Aberdeen Standard Investments heaped scorn on the housebuilder as richly-rewarded executives made headlines, stating the chief executive’s £75m pay packet did “not even get close to acceptable”.
Speaking at the AGM, head of stewardship Euan Stirling said the long-term success of the company was being endangered by the “reputational damage associated with grossly excessive pay”.
Blackrock’s statement following the AGM stated: “Persimmon’s compensation plan highlights the unintended consequences of overly mechanistic pay structures, particularly ones that can be influenced by external events.”
Royal London Asset Management was not among the largest shareholders in 2012, but declared it would be revolting over pay at Persimmon’s 2018 AGM.
It admitted it voted for the LTIP in 2012, but has voted against the company’s remuneration plans since Ashley Claxton Hamilton joined the asset manager in 2013 when it acquired The Co-op Asset Management.
Ebb and flow
Despite asset managers turning up pressure on executive remuneration this AGM season, Parry is doubtful this is the start of a long-term trend.
He said: “The tide ebbs and flows. As soon as there’s a bit of outrage, that’s prompted from the media over this, the fund managers jump around and try and pretend they’re the good guys.
“There are some people out there that are very responsible, but there are still a lot of fund managers who are grossly overpaid themselves and are simply not interested.”
Not fit for purpose
Shareaction chief executive Catherine Howarth said the incentive scheme transferred value to management from investors equal to a full year’s profit.
“This is actually a very meaningful amount about what in terms of what shareholders might have obtained if the pay plan hadn’t gone through,” Howarth said.
Share buybacks inflate share prices to the benefit of executives’ pay schemes and remuneration committees do little to police that, Howarth said.
Exogenous factors could also inflate share prices she said. In the case of Persimmon, that includes the government’s help-to-buy programme.
“The shareholders should get hand of it rather than the management because it wasn’t their brilliance and skill,” she said.
The House of Commons business select committee’s report on executive pay recommended to abolish LTIPs, Howarth noted.
The committee concluded they were not a good way to measure executive performance and the value of the reward is heavily determined by the share price at the time of the grant.
