Big bonuses


(Jeff puckering) #1

Wondered what people’s thoughts were on big bosses getting ludicrous bonuses and what it makes you think about investing in them.

The persimmon payment to Jeff Fairburn of £75m really made me think!

[Persimmon boss refuses to answer questions about £75m bonus http://www.bbc.co.uk/news/business-45915486]

Reading the article its part of a share bonus so could be seen to be just good luck, it’s only like the freetrade team making a bunch of money on their freetrade shares (I’m guessing shares are part of the incentives/remuneration)

Not sure where I sit morally or from am investing standpoint and would be interesting to know thoughts!


(Tony) #2

I personally think it’s obscene.

In the current climate of austerity to get that massive a bonus? I don’t care if it’s in the form of shares, property, cash, gold bullion or lap dances, it’s too too much.

I won’t be investing in them.

(takes off his Socialist hat and puts the Capitalist hat back on, considering where we are!)


(Emma) #3

You might have missed the announcement but austerity is over. That’s why they’ve started paving the streets with gold again and the 2 for 1 deals on caviar.

Nobody is worth £75 million. So many things to consider with ethical investment


(Vladislav Kozub) #4

I believe there is nothing unusual about this bonus size. After all, it was agreed six years ago (i.e., not a yearly bonus but a one-off) and under their management (and, of course, favourable building conditions created by the state in a form of HTB scheme), the firm’s value is six time bigger than when the bonus was announced.

Technically, it would have been just about £18m if the firm grew at 7 to 10 percent (market average) per year. And that is about £3m per year. An absolutely reasonable figure for a listed company management.

It is not unethical for shareholders to award the management for unbelieveable share growth that was deivered during their administration.


(Harry) #5

I agree with @Vlad on this, I agree £75m is a big number - but based on the above perspective I think it is explainable and therefore warranted.

I think there can be times where it is not warranted, but I would not put it down to an ethical error. It is a corporate governance error - if a director or employee is paid a sum that is out of line with their value to the company there is something structurally wrong, and I wouldn’t invest on that basis.

I don’t think there’s anything wrong with rewarding someone who has added enormous value to a business.


(Jeff puckering) #6

The headline and the reality are very different which is why I found it interesting. If I had a share scheme at work and the value quadrupled in 6 years should that growth even be considered a bonus?

I think there is an issue with big payouts and bonuses (and £75 million is a lot of money however you look at it) but I do have issue with the way the story has been spun.

Thanks for doing the maths I was trying to think what it would be worth without the growth and your right, although still a lot of money not far from market rate for that kind of role I would say.


(Vladislav Kozub) #7

Modern media is less about the information and more about the hype. The journalists could do that maths easily but would that raise hype and earn clicks? Of course no. Their bread and butter is mainly controversial news, even despite them being state-funded.

It will be, but that is not the original agreement. The original agreement was a number of shares that they could redeem within six years - not the plain £75m (used to be £100m) figure. There is no reason for BBC to shame the company for doing good business. Shareholders understand it and do not complain too much. But the general public will pay more attention to the final sum rather than maths and years of work behind it. Persimmon CEO’s actual salary rate is mere £675,270 with a slight bonus of £1.3m.


To look at it from another perspective, imagine your employer says that he will pay you a standard rate of £30,000 a year and a commission of 1% based on sales you make. You are great at selling and your sales amounted to £10,000,000, hence you expect £130,000 to be paid. But the employer says “sorry mate, I give you £80,000 and you should be happy, that is a lot anyway. Cheerio”. Oversimplified but similar gist. If something has been agreed, there is no reason why the agreement should change in case the results are too good.