Sunday 1 September 2019 6:32 pm

Berkeley Group faces opposition to new bonus policy

Berkeley Group is facing opposition to its payment policy after a shareholder advisory firm urged investors to vote against the housebuilder’s new bonus structure at a meeting this week.

The payment policy has been opposed by Institutional Shareholder Services (ISS), which said proposals to axe its bonus were “unlikely to affect the remuneration received by executives going forward”. 

Read more:Berkeley Group chairman Tony Pidgley on Brexit, buildings and bonus backlashes

The changes include extending the long-term incentive plan (LTIP) for a further two years and the removal of LTIP caps while maintaining a baseline dividend pay-out. Shares earned but not vested by 2021 will have to be re-earned by management over a four-year period. 

In a research note to investors Institutional Shareholder Services (ISS) said: “This fails to encourage an enhanced level of company performance, with awards vesting simply for maintaining the established returns policy and invites criticism that there is significant scope for improved alignment between performance and payout.”

ISS added that the policy “fails to demonstrate awareness of the changing remuneration landscape.”

Proxy adviser Glass Lewis has also opposed the proposals, while IVIS has recommended shareholders back the changes at a meeting on Friday , according to the Telegraph. City A.M. has contacted Berkeley for comment.

A spokesperson for Berkeley said: “Major shareholders consulted by Berkeley have provided a positive response to the proposed changes”.

Meanwhile, Britain’s largest housebuilder Barratt expects to report pre-tax profits of £910m in its full-year results on Wednesday, up from £835m the previous year. 

On Tuesday, FTSE 250 property developer Redrow is expected to report profit before tax of about £390m and revenue of £2.04bn, according to S&P Global Market Intelligence analysis. 

Some housebuilders have faced criticism that the Help to Buy scheme has been used to inflate house prices and boost profit, despite it being designed to help first-time buyers on to the housing ladder. 

Read more:Berkeley Group boosts full-year profit guidance

A report by the National Audit Office found that Help to Buy had helped to boost the profits of property developers. 

The UK’s five biggest housebuilders sold between 36 per cent and 48 per cent of their properties with the help of the scheme in 2018. 

Main image credit: Getty