Pidgley wins NAPF backing for Berkeley bonus plan

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The Independent Online

The controversial restructuring plan for Berkeley Group, which could see the housebuilder's management making at least £100m, has received a major boost after getting the backing of one of the country's most powerful shareholder organisations.

The controversial restructuring plan for Berkeley Group, which could see the housebuilder's management making at least £100m, has received a major boost after getting the backing of one of the country's most powerful shareholder organisations.

The National Association of Pension Funds has advised members to support the company's scheme, which will see management end up with 15 per cent of the group.

This stance contrasts sharply with that adopted by the other major shareholder body, the Association of British Insurers, which has strongly opposed the scale and method of the rewards available to directors. Some of Berkeley's leading individual shareholders have also publicly opposed the incentive plan.

According to the NAPF, the rewards offered to Tony Pidgley, the chief executive, and his team under a long-term incentive plan (LTIP) "will depend on considerable value being delivered to shareholders".

Berkeley's scheme, which will be put to the vote at an extraordinary meeting of shareholders next week, will reward directors only if the company returns £12 a share, or £1.45bn, to investors, by 2010.

The NAPF said: "We have analysed the LTIP to assess whether there is a possibility that executive directors could be rewarded for poor performance.... We are satisfied that the structure of the proposals minimises the opportunities for an inappropriate outcome."

While the organisation approved of the structure of the executive reward scheme, the NAPF passed no judgement on the scale of the incentive.

Berkeley plans to sell its traditional housebuilding interests, returning the money raised to shareholders. It will then focus on the specialist area of urban regeneration developments. While it is not possible to accurately value 15 per cent of the restructured company, it has been estimated that it would be worth £100m or more.

The NAPF approved of the length of the period over which the directors' performance will be measured - six years - which it said was twice that operated by most UK companies. However, Berkeley did not adopt the NAPF's suggestion that the more the rump company turned out to be worth, the longer directors should be made to stay on after 2010.

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