Persimmon is slashing bonus payouts to three executives by £51m, including a £25m cut for its chief executive, after the UK’s second largest housebuilder was strongly criticised over its controversial pay deal.

The FTSE 100 firm said Jeff Fairburn would receive £75m worth of shares rather than £100m under the company’s long-term incentive bonus plan.

Based on Thursday’s closing share price, Mike Killoran, the finance director, will receive £24m less than the £78m originally slated, while the bonus for Dave Jenkinson, the managing director, will be cut by £2m to £38m.

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All three will have future payouts under the scheme capped at £29 a share, compared with a current share price of around £25.

Persimmon said the incentive plan had been a significant driver of the company’s “outstanding performance”, but acknowledged the lack of a cap in the original terms of the scheme was a mistake.

“It is clear that the absence of a cap … has given rise to the potential for payouts which, when triggered in full, will be significantly larger and paid earlier than might reasonably have been expected at the time the scheme was originally put to shareholders,” it said in a statement.

Persimmon has come under intense pressure both publicly and privately from politicians and shareholders for planning record-breaking bonus payouts to bosses after the company benefitted from the taxpayer-backed help-to-buy scheme.

The change of heart came after shareholders started to voice complaints and indicated they were considering voting against the re-election of some directors at the company’s annual general meeting on 25 April. This week the company’s sixth-largest shareholder, Aberdeen Standard Investments, described Fairburn’s bonus as “grossly excessive”, and said it remained a huge concern despite his recent pledge to donate some of it to charity.



Responding to Persimmon’s move, Royal London Asset Management said on Friday that while the board had finally listened to shareholders, the sums being paid to the executives were still generous. The investment management firm has a 0.5% stake in Persimmon, worth about £35m.

“This incident has been a classic corporate governance failure and highlights the need for remuneration committees to step up and make decisions if circumstances beyond a company’s control change,” said Ashley Hamilton Claxton, the head of responsible investment at Royal London.



“However, even after this reduction, in our view the scale of the remuneration on offer under this plan is still extremely generous given the government’s support for the sector through the help-to-buy scheme. Despite this, we hope the company and shareholders can now draw a line under this issue, allowing management to devote their focus solely to the running of the company.”

Announcing the bonus reduction, Persimmon said its remuneration committee was “fully supportive” of the decision. Nicholas Wrigley resigned as company chairman in December over his role in orchestrating the pay scheme.

The company will be hoping it takes some of the pressure off its senior management as it prepares to publish its 2017 results next week.

Earlier this month, Fairburn said he decided some time ago to give some of his bonus away but that he had wanted to take an “old-fashioned approach” and keep the decision private.

Last year the Guardian revealed that his pay deal could be used to provide a council house for every homeless family in Yorkshire, where Persimmon is based. Even reduced by a quarter, Fairburn’s bonus could be used to build more than 1,000 council houses. A donation of £4.6m could provide a home for all of the 58 registered homeless families in York. It would cost £60.8m to build a home for all 760 homeless families in the Yorkshire and Humber region.