Jeff Fairburn announced on Wednesday he would be standing down as chief executive at the end of the year after the company said the public furor over his pay had become a “distraction”.
The pay row hinged on Fairburn’s bonus as set out in the 2012 long term incentive plan (LTIP) agreed in 2012 and set to hand more than £500m to 140 senior staff. Fairburn was originally in line to receive £110m but this was later reduced to £75m.
Persimmon said in an announcement that the decision had been made by mutual agreement. It concludes Fairburn’s 29 years at the firm. He has been CEO since 2013.
It added: “Jeff has been a successful leader of the business since his appointment in 2013, but the board believes that the distraction around his remuneration from the 2012 LTIP scheme continues to have a negative impact on the reputation of the business and consequently on Jeff’s ability to continue in his role.”
David Jenkinson, group managing director, will be appointed as interim group chief executive on 31 December when Fairburn leaves the company.
Persimmon performance under Fairburn
Royal London Asset Management (RLAM) holds 0.42% of the company, or 1.3 million shares worth roughly £31m.
Ashley Hamilton Claxton, head of responsible investment at RLAM, said executive pay has cast a long shadow over Persimmon’s strong performance for shareholders.
She added: “This saga is a clear example of how a poorly thought out remuneration decision, in this case made six years ago, can have serious consequences for a company and its shareholders.”
However, Hamilton Claxton said it was regrettable that changes have had to be made to a good management team.
“While today’s news is totally understandable, we are sorry to see changes to what we believe have been one of the best management teams in the industry, but we remain confident about the health of this business,” she said.
Housebuilder’s reputation has been tarnished
But Aberdeen Standard Investments, which owns 1.3% of Persimmon, welcomed Fairburn’s departure.
Euan Stirling, head of stewardship and ESG Investment at Aberdeen Standard Investments, said: “Persimmon’s reputation has been tarnished by issues around Jeff Fairburn’s pay. We welcome the action taken by the board and we will continue to engage with the company in order to help, where we can, with the restoration of the company’s standing.”
ASI has long been opposed to the remuneration package. In a statement released prior to Persimmon’s AGM in April, Stirling said “the long-term success of the company is being endangered by the reputational damage associated with grossly excessive pay”.
“The reduction in the amount accruing to him from £110m to £75m does not even get close to acceptable,” he added.