New Year’s Eve was certainly a day for celebration in the household of 53-year-old Jeff Fairburn, chief executive of the housebuilder Persimmon. He was due to receive the first £50 million tranche of shares under a bonus scheme that has won him total entitlements of £110 million. He must have done a terrific job, you’ll be thinking, if shareholders value him so highly. But in fact his winnings (plus £400 million shared by 150 other Persimmon executives) are the freak outcome of a 2012 scheme that was tied to the company’s share price and dividend record but failed to include a cap on how high rewards might go.
Then in April 2013 came George Osborne’s ‘help-to-buy’ initiative, designed to kickstart the housing market by offering homebuyers a government loan of 20 per cent of the purchase price, interest-free for five years. Half of Persimmon’s recent house sales have been underpinned by help-to-buy, and its share price has almost tripled in response. The resulting scale of bonuses is so embarrassing that both chairman Nicholas Wrigley and senior non-executive director Jonathan Davie have resigned; both are ex-bankers, marinated in City megabucks, but with a PR disaster looming they could not persuade Fairburn either to refuse part of the payout or surrender it to charity.
So the story is a gift for the left, whose cheerleaders have been dancing all over it. That being the case, let me attempt a plea in mitigation. Here goes. First, these bonuses are not, as some have suggested, a skimming-off of taxpayer-funded interest subsidies; they are actually being paid for by other shareholders whose holdings have been diluted — but who are still doing very nicely, thank you. Second, to build the number of new homes that might ease the current housing crisis, we need a profitable, fast-expanding private housebuilding sector led by talented and suitably incentivised executives; and Fairburn’s bonanza aside, a scheme that rewards 150 managers is really quite democratic.