ABI issues 'red alert' on £600,000 bonuses for Bellway trio

Published on Sunday 4 January 2009 20:16

BELLWAY could face a shareholder revolt after the housebuilder awarded three top executives bonuses worth £600,000, despite plunging sales and profits last year.

The Association of British Insurers (ABI) said it had "grave concerns" over Bellway's adherence to corporate governance standards, issuing a rare "red top" alert – its highest level of concern – to its members.

In its recent annual report, Bellway, which has been severely hit by the slump in the housing market, revealed that chief executive John Watson had received a bonus of 275,000, while finance director Alistair Leitch and commercial director John Watson received bonuses of 178,500, 55 per cent of their respective annual basic salaries.

The bonuses came despite Bellway's pre-tax profits for the year to 31 July falling from 234 million to 35m as sales slumped in the second half of the year. In its annual report, the company explained that the remuneration committee elected to pay the bonuses because of a strong performance compared with the wider housebuilding sector.

The report said: "The 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."

Bellway's shares fell 28 per cent last year, but still outperformed rivals due to its lower debt pile and an early decision to cut back on projects early in 2008. The housebuilding sector was the worst performing of all in London in 2008, with the value of Taylor Wimpey, once Britain's most valuable housebuilder, collapsing to just a few pence on fears its debts could cause it to collapse.

But Peter Montagnon, head of investment affairs at the ABI, said the bonuses were a "clear break of the relationship between remuneration and performance", warning that companies which do not show restraint over boardroom pay might face a public backlash.

The "red-top" alert does not advise ABI members to vote against a resolution, but instead raises its highest level of concern about an issue of corporate governance.

Reports out yesterday quoted unnamed institutional investors as saying they planned to vote against the resolution on executive pay at the company's annual meeting on 16 January.