Mike Farley, the former boss of Persimmon, is to collect nearly £20m in shares this December, part of a £240m payout lined up for managers at the housebuilder. At least 140 senior executives will share the award – the first tranche of a 10-year bonus scheme that could be worth nearly £620m by 2021, based on Persimmon’s closing share price on Friday. The managers will get the maximum award if they hit a target to return £1.9bn to shareholders over the 10-year period beginning in 2011.
The payouts, which mirror a multimillion-pound bonus scheme at Berkeley Homes, come amid a housing crisis in Britain that politicians on all sides argue is pushing up houses prices and rents.
While housebuilders have increased the number of homes built in the last couple of years, there is a crisis in the availability of affordable homes in many parts of the country. This year, the campaign group Just Fair, whose members include Crisis, Oxfam, Amnesty International, Save the Children and Unicef UK, warned that the UK is in breach of its own United Nations human rights commitment to provide people with adequate homes because the housing problem is so serious. The government has said it has delivered more than 217,000 new affordable homes since 2010, but critics argue that this represents only a fraction of the number needed to meet demand.
The announcement of Persimmon’s bumper award comes after a 54% rise in its share price over the past year as the company’s profits have been boosted by the government’s help to buy scheme aimed at first-time buyers, cuts in stamp duty for the majority of buyers, and a relaxation of regulations on affordable house building.
It emerged this month that the boss of Berkeley Homes, another of the UK’s biggest housebuilders, received £23.3m last year at the start of a series of payouts to the company’s top executives that could add up to £500m in the next six years. Last week, Bovis said its profits had risen 9% to £54m in the first half of this year after it completed a record 1,525 homes in the period.
The following day, Persimmon reported a 31% rise in profits for the first half of the year. It said profit before tax was £272.8m for the six months to the end of June, up from £208.9m for the same time last year.
While housebuilders’ fortunes have soared under the current and previous governments, they also enjoyed a boost from Labour as it tried to meet housebuilding targets during the squeeze on mortgage lending in 2007 and 2008.
Gordon Brown relaxed planning laws and committed at least £200m to purchasing unsold stock from house builders for use in social or affordable housing. Without this initiative and a raft of other measures at the time, many developers were expected to go bust, but instead survived to issue directors shares at rock bottom prices.
Persimmon’s strong run since 2011 will mean that Farley, who retired in April 2013, will be able to exercise an allotment of 966,400 shares on 31 December under a deal agreed by Persimmon’s board in 2012.
The payout comes because the company has already surpassed a target to pay out at least £1.70 a share to investors by December this year. A 95p-a-share dividend paid at the end of June took the total payout since the scheme started in 2012 to £2.40 per share.
That achievement triggers share awards equivalent to nearly 40% of managers’ total potential payout under the long-term incentive scheme. However, all except Farley will have to wait to exercise their shares until December 2017.
A spokesman for Persimmon said: “The scheme was approved by shareholders in 2012. This is a long-term plan which is designed to drive outperformance. Since it was initiated, build volumes have grown 48% and shareholders have seen £734m in returns.”
In the first round of awards set for December, Jeff Fairburn, chief executive, is in line to receive 934,992 share options, worth £19m at Friday’s share price, while finance director Mike Killoran will collect 1.3m share options worth £26.8m. Nigel Greenaway, boss of Persimmon’s southern division, will be in line for 595,980 options worth £12.27m.
If they achieve their target of paying out £1.9bn to shareholders by 2021, four senior directors, including David Jenkinson, the regional director for the north, as well as Farley, will share about a third of the total payout to managers. Fairburn alone could receive almost £100m.
• This article was amended on 24 August 2015, as the opening paragragh referred to a £1.9m payout instead of £1.9bn.
