Persimmon chief executive Jeff Fairburn could face prosecution over his £75 million bonus, after leading shareholder Aberdeen Standard Investments instructed its in-house lawyers to look into the matter.
Aberdeen Standard Investments, which manages £650 billion of pensions and savings, is looking into whether there are grounds to prosecute Fairburn under the Companies Act, according to The Mail on Sunday.
Aberdeen believes Fairburn may have broken the Companies Act by taking such a large pay package, which it considers to have tarnished the reputation of Persimmon.
The case represents one of the most acrimonious pay rows in the City for decades.
It comes after reports revealed Fairburn could make £75 million under Persimmon’s controversial share scheme – even after giving up a chunk of incentives that could have taken the package to more than £100 million.
Finance director Mike Killoran and managing director Dave Jenkinson will also make tens of millions of pounds each.
The incentive scheme, put in place in 2012, did not have an upper limit and was based on the share price, which has since risen strongly. The shares have been boosted by the introduction of the taxpayer-backed Help to Buy housebuilding scheme in 2013.
Euan Stirling, head of stewardship at Aberdeen Standard, which has a 2% stake in Persimmon, told the building company’s annual meeting in April that the bosses may have breached Section 172 of the Companies Act 2006. This sets out a director’s duty to act in ways that will promote the success of a firm.
Stirling said if an action were to go ahead against Fairburn, he would be the first director ever to be prosecuted under the clause.
Aberdeen Standard is looking into whether there is a basis to go to the authorities and request that they prosecute Fairburn – and possibly also Killoran and Jenkinson.
“People keep saying, ‘Shareholders should do more’ – so one of the reasons we’re doing this is because every time there’s a scandal we also get upset about it and we do what we can,” Stirling argued. “The directors have the responsibility here and they’re acting the wrong way in my view.”
He also criticised the vague wording of the Companies Act which he said “may make it impossible to do anything”. He said Section 172 may need to be redrafted.
Any potential legal action is unlikely to result in money being paid back to investors.
Stirling recently appeared in front of MPs to discuss executive pay following a poor performance from Persimmon’s pay committee chairman Marion Sears, who was drafted in as the company’s remuneration committee chairman in December after her predecessor quit last year.
Sears was castigated by MPs on the Business, Energy and Industrial Strategy Committee for not knowing the pay of an average member of Persimmon staff.
Persimmon argued in February that its 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.
Last year the Guardian revealed that Fairburn’s pay deal could be used to provide a council house for every homeless family in Yorkshire, where Persimmon is based.