Page last updated at 13:13 GMT, Sunday, 4 January 2009

Investor warning on Bellway bonus

A Bellway worker
Like other housebuilders, Bellway has trimmed its workforce

Housebuilder Bellway looks set to clash with investors at its annual meeting after a shareholder watchdog raised concerns over management bonuses.

The Association of British Insurers (ABI), which represents major investors, said some shareholders were likely to oppose the payouts.

Newcastle-based Bellway saw pre-tax profits plunge 30% to 165.7m in the year to 31 July with sales down 50%.

The firm declined to comment on the ABI's report.

The body criticised Bellway for ditching previous performance targets for its directors.

And it issued a "red top warning" - a sign that it foresees serious levels of shareholder concern with remuneration at the annual general meeting on 16 January.

Of about 700 companies which it monitors, the ABI says it only issues the warnings in about 2-3% of cases.

'Very good' performance

Bellway's top three directors were paid 632,500 in bonuses - 55% of their combined salaries.

It sold 6,556 houses during the period - down 14% from the previous year. The average sale price slipped from 173,300 to 169,700 and its shares fell sharply as mortgage availability drying up hammered the industry.

They must be more sensitive to the situation because if they don't the whole system falls into disrepute

Peter Montagnon

But the firm argued that it has done well compared with rivals such as Taylor Wimpey and Barratt Developments.

"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.

Its annual report conceded that that a "rapidly deteriorating" housing market "necessitated a review" of its bonuses.

'Hot topic'

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.

"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.

"Executive remuneration is becoming a hot political topic. They must be more sensitive to the situation because if they don't the whole system falls into disrepute."

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