Investor urges UK builder Persimmon to scale back executive pay plan

* RLAM says Persimmon plan not in investors' interests

* Several big UK firms have seen shareholder revolts overpay

By Esha Vaish

June 13 (Reuters) - A large investor has called for Britishhousebuilder Persimmon Plc to scale back an executivepay plan that could see its management share in windfalls ofalmost 600 million pounds ($857 million) over the next sixyears.

The call from fund manager Royal London Asset Management(RLAM) follows recent shareholder revolts over management pay atseveral British companies, including advertising group WPP and energy giant BP.

However, as Persimmon's shareholders approved the company'slong-term share incentive plan (LTIP) in October 2012 andendorsed its director pay policy again in April, there isunlikely to be any obstacle to the executives receiving one ofthe biggest bonanzas in the residential property sector.

"Given the political and economic context of a nationalhousing shortage and government support for the sector, awardingan LTIP of this size is not in the best interests of investorsand insensitive to Persimmon's wider stakeholders," said MikeFox, head of sustainable investments at RLAM, which holds a 0.44percent stake in Persimmon worth 26.3 million pounds.

"We would ask Persimmon to show its discretion in temperingthe scale of awards," he wrote in an e-mailed statement.

Since the long-term incentive plan was approved, Persimmonshares have gained 198 percent, outpacing peers BarrattDevelopments Plc, with a rise of 196 percent, andBerkeley Group Holdings Plc, up 110 percent, which hasa slightly larger LTIP programme than Persimmon.

However, Persimmon's shares have underperformed those ofTaylor Wimpey Plc, which gained 247 percent over theperiod after falling more steeply during the 2008 financialcrisis. Persimmon shares slipped 1.9 percent on Monday.

About 150 Persimmon executives have the right to earn sharesequalling up to 10 percent of the company's total value, orabout 30.2 million shares, provided the company hits a series ofprofit and investor return targets.

Based on Persimmon's closing price last Friday of 1,976pence, giving the company a market value of 6.09 billion pounds,the windfall would be worth about 596.7 million pounds ($845.5million).

Persimmon defended the programme. "This is a long-term planthat runs for almost a decade which is designed to driveoutperformance through the housing cycle and to incentivise themanagement to deliver the capital return, grow the business andincrease the share price," a company spokesman said.

Since the scheme was put in place, Persimmon has delivered a56 percent increase in new homes completed and returned 1billion pounds to investors.

Under Taylor Wimpey's incentive plan, executive directorscan be annually awarded shares worth up to twice their basesalary that vest after three years.

Shore Capital analyst Robin Hardy said there was someconcern that housebuilders' strong performances over the pastfew years could only in part be attributed to management drive.

"So there is a bit of a debate about how much of the profithas been earned genuinely from good strategy execution and howmuch of it has come from a very rosy market environment beingcreated for the housebuilders," Hardy said.

House sales have been boosted by British governmentmeasures, including a scheme to help people buy houses launchedin 2013, under which 73,813 properties had been bought by Dec.2015, according to official data. [ID:nL5N16Q5F2}

UK Shareholders' Association, which represents small retailinvestors, has vocally opposed Persimmon's plan from the start.($1 = 0.7000 pounds) (Reporting by Esha Vaish in Bengaluru; editing by Adrian Croft)