Persimmon's grotesque bonus payments strengthen case for corporate reform

It might be a bit much to say you could have put a monkey in charge of Persimmon Homes and still made pots of money. But given the favourable set of circumstances confronting it of late, it surely isn’t all that far from the truth.

Despite this, the company has been operating a bonus plan that would be excessive even by the absurd standards that operate across the Atlantic.

I first highlighted it in April, when Persimmon held its AGM, but only now is it causing a serious fuss partly because people have woken up to the staggering scale of the pay outs that will start being made on December 31.

There’s well over £100m for CEO Jeff Fairburn, a shade under £600m for the company’s 150 top employees in total. Quite the happy new year.

Apparently this is necessary to keep them motivated, as if bloated salaries, and more sweeties than Augustus Gloop could consume at Willy Wonka’s chocolate factory, weren’t enough.

The fact is these executives have been on easy street, and worse still, they have the taxpayer to thank for that.

Britain has a shortage of housing supply, and a glut of people desperate to get on the ladder.

Back in 2013 the Government introduced its Help to Buy Scheme which called upon taxpayers’ funds to assist them with that. It created a surge in demand and juiced prices, and thus flattered Persimmon’s results. About half the homes it sells are purchased through the scheme.

Of course there’s a corporate video extolling its virtues, with a piano thinking gently in the background as the narrator gushes. This is great!

Persimmon’s stock duly soared, and with the scheme linked to payouts to shareholders, rather than investments in the business or building new homes, the company’s executives hiked them, guaranteeing themselves a festive season to remember.

Until, that is, the resultant fuss resulted in chairman Nicholas Wrigley, a former banker it’s worth pointing out, announcing his intention to resign along with Jonathan Davie, the senior independent director and chair of the remuneration committee.

They still say the disgraceful scheme was “significant factor in the company's outstanding performance”, which shows just how spectacularly tone deaf these people are. But they concede that they perhaps ought to have included a cap on the total payment. No kidding.

Here’s the thing: There were one or two voices raised in protest at what was going on earlier in the year. Voting advisor Pirc, Royal London, names which you typically find on the right sides of debates like these. But the remuneration report still sailed through.

Now it’s become a live issue, you’ll see others joining a bandwagon they should have been on months ago. It isn't only Mr Wrigley and Mr Davie who could be accused of having been asleep at the wheel.

But what to do about it all?

A while back I reported on some work done by Ewan McGaughey, an academic at King’s College London.

He argued for an end to the shareholder monopoly on corporate governance, in favour of giving workers greater involvement. This, he suggested, could serve to improve productivity to the benefit of all stakeholders

Having workers in the boardroom could also help to prevent companies from indulging in the sort of crass behaviour Persimmon has over remuneration, behaviour which is in opposition to the best long term interests of shareholders, even if you take into account the payouts they have received.