Taylor Wimpey tweaks criteria for executive pay deals

Taylor Wimpey has tweaked the criteria it will use for rewarding senior executives this year as it prepares a new remuneration policy to present to shareholders in 2020.

The housebuilder said it had added build quality and order book conditions to bonus requirements for the firm’s top management team and removed the element relating to the conversion of operating profit into operating cash flow.

Taylor Wimpey said the order book measure would “provide greater direct emphasis on sales volume and will require improvement over the 2018 full year outturn”, while linking build quality would “underpin our goal to deliver high-quality homes and reduce the number of instances requiring remediation”.

It added: “Improvement in performance against both of these new measures is expected to generate improvements in financial performance and generate shareholder value.”

The firm’s new weightings for performance conditions will be: operating profit (40%), return on net operating assets (20%), customer service (20%), order book (10%) and build quality (10%).

Taylor Wimpey’s moves reflect a growing recognition that lucrative pay deals for executives at major housebuilders are facing greater scrutiny, as are questions around the quality of some new-build homes.

The sector has come under fire over pay awards to senior executives following the Persimmon pay row which saw former chief executive Jeff Fairburn handed a £75m pay packet.

Fairburn was forced to step down at the end of last year and the firm’s chair, Roger Devlin, has since brought in a new non-executive director to oversee pay under what he called a plan to “build a new Persimmon with progressive changes”. Claire Thomas, group HR director for pharmaceutical firm GlaxoSmithKline, starts at the beginning of August.

Taylor Wimpey has also beefed up its board, with incoming non-executive director Gwyn Burr, who also sits on developer Hammerson’s board as a non-exec, joining the firm and starting her new role “in good time for the preparation of a new remuneration policy to be submitted to shareholders by way of a binding vote at the 2020 AGM”.

While it has yet to start work on its new remuneration policy, Taylor Wimpey said it believed that payments to executive directors for 2018 were “appropriate, linked to performance delivered and [have] taken account of the broader circumstances within which incentive payments should be made”.

It said its remuneration report had been approved by 97% of shareholders who voted at last week’s AGM and it “continued to have a strong track record of shareholder support on the company’s remuneration matters”.

But Cenkos analyst Kevin Cammack said housebuilders were now being lumped into the same boat as bankers.

“What I find slightly troubling is that ‘fat cat’ territory was always the prerogative of bankers and financial institutions but now we have housebuilding captured in the same vein,” he said.

“That cannot in the long term be good for government’s favouritism towards the sector.”