Bellway to come under fire over bonuses

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The Independent Online

Housebuilder Bellway is expected to come under fire from shareholders today after the company ditched previous performance targets to pay out huge bonuses to directors.

The Association of British Insurers (ABI), which represents major investors, recently issued its strongest "red-top" warning ahead of the group's annual meeting in Newcastle later today.

The group's top three directors were paid £632,500 in bonuses - 55 per cent of their combined annual salaries - in the year to 31 July.

Bellway's annual report said a "rapidly deteriorating" housing market "necessitated a review" of its bonus structure.

Pre-tax profits plunged 30 per cent to £165.7 million over the period, and its latest update in December said sales rates were down more than 50 per cent 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 about 700 companies and only issues red-top warnings in 2-3 per cent 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 with 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.

"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."