House builders are not going to do that: Persimmon convincingly evidences today that restricting supply is in their own best interests.
So, let us go and look at the link Ritchie tells us proves this.
A leading City investor has called on housebuilder Persimmon to cut back an executive pay plan that could see the management share £600m over the next five years.
The scheme is one of the largest ever at a FTSE 100 company outside banking.
The biggest beneficiary will be chief executive Jeff Fairburn, who could earn more than £100m.
Mike Fox, from Royal London Asset Management, said the payments were too high “in all circumstances”.
He called on the board to show restraint in the light of the housing crisis and government support for the housebuilding industry.
When the scheme was put in place, the housing market had begun to recover from the 2008 recession. About 150 managers were given the opportunity to earn shares worth up to 10% of the company’s total value, provided they hit tough targets on returning money to investors.
The company recently said it was running well ahead of those targets, and analysts say it is likely the scheme will pay out in full. Persimmon shares have more than tripled in value since the incentive plan was put in place, rising from £6.20 to about £20.
Hmm, so, executives incentivised to deliver profits to shareholders. We might think of this as a solution to the principal agent problem but it’s difficult to see why this means that the company won’t be building housing.
The company has defended the payouts, saying that since the scheme was put in place. Persimmon has increased the number of new homes it builds by half and invested more than £2bn in new land.
So it’s built more housing and stuck even more money into land to build yet more housing.
This proves that not building more housing is in the best interests of private market actors, does it?
Just where is it that he buys his logic from? Because I want some. With this sort of thing I could prove to my wife that having a girlfriend was my being even more faithful than monogamy.