Bellway warned over bumper bonuses
Updated on 04 January 2009
Housebuilder Bellway is set to clash with investors after ditching previous performance targets to pay out huge bonuses to directors, it has emerged.
The Association of British Insurers (ABI), which represents major investors, has issued its strongest "red-top" warning ahead of the Newcastle-based group's annual meeting on January 16.
The group's top three directors were paid £632,500 in bonuses - 55% of their combined annual salaries - in the year to July 31.
Bellway's annual report said a "rapidly deteriorating" housing market "necessitated a review" of its bonus structure. Pre-tax profits plunged 30% to £165.7 million over the period, and its latest update in December said sales rates were down more than 50% on last year in "extremely testing" conditions.
But the ABI's head of investment affairs, Peter Montagnon, said: "One of the most important principles of directors' remuneration is that targets should be linked to performance. What they have done is torn up the targets and paid the bonuses anyway. Quite a number of shareholders are likely to vote against this."
The ABI monitors around 700 companies and only issues red-top warnings in 2-3% of cases. Bellway's shares fell by more than a quarter during a disastrous year for the industry as mortgage availability dried up.
But the company argued it had performed strongly compared to ailing peers such as Taylor Wimpey and Barratt Developments, which suffered even heavier damage.
"The (remuneration) committee took into account the company's financial performance in its own right and also compared to other housebuilders, and considered that management's own performance had been very good in extremely challenging conditions," the annual report said. Bellway intends to operate a "less formulaic" bonus structure this year, it added.
But Mr Montagnon said: "It is important at the stage we have got to in the economic downturn that companies do not go on paying large salaries and bonuses regardless."
Bellway chief executive John Watson declined to comment.
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