Monday, 13 June 2016

Persimmon Plc

Persimmon has an executive pay plan which could see top executives at the house building group share approximately £600m over the next five years.

The scheme, one of the largest ever at a FTSE 100 group outside the banking sector, could see group chief executive Jeff Fairburn earn more than £100m. Under the plan, which began as the housing market began its recovery following the 2008 financial crisis, the London-listed company gave approximately 150 managers the chance to earn shares worth 10% of the group's value, provided they hit a number of targets.

Persimmon have said the plan was running comfortably ahead of its targets and shares in the company have soared from £6.20 to £20 and the house builder has defended the scheme, indicating it has returned £1bn to shareholders and invested more than £2bn since the plan was first implemented.

The current housing crisis in the UK requires about 500,000 new homes to be built each year, the current figure being 200,000 but with an estimated 300,000 new migrants entering the country each year the real figure is probably about 1 million new home will be required.

Apart from the immigration issue which is top of the list on the leave / remain campaigns agendas another problem not easily satisfied is how easy it is fro developers to wriggle round local councils. Councils and developers have long been engaged in what amounts to a grand haggle. Developers examine a council’s affordable housing target and then make an opening offer, which is likely to be much lower. It is up to the planning authority to determine whether the basis for the calculations is fair and correct and a battle of the experts often ensues.

Frequently, the developer has not yet bought the site from the landowner, which gives them a significant negotiating advantage because there is a constant threat that if the negotiation doesn’t go their way, they could back out of the deal and the landowner could sell the site for commercial use instead. The local council risks losing not only the affordable homes, but all the homes.

This is a single issue that the Westminster government should get hold of irrespective of the EU referendum.

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