“Red-top” alert is issued by Association of British Insurers over Berkeley’s plan to offer senior management £100m in restructuring plan

The Association of British Insurers has issued Berkeley with its severest corporate governance warning in response to the group’s proposed incentive scheme for senior management. The “red top” warning is comparatively rare and flags up serious investor concerns.

The incentive scheme is part of a restructuring plan that would see Berkeley scale back its housebuilding activities to concentrate on more urban regeneration.

The scheme put forward by Berkeley’s senior management would see the return of £1.45bn to shareholders over six years. The plan would see management receiving 15% of the downsized company, which would mean Berkeley’s founder Tony Pidgely and three other senior managers would be rewarded a share of £100m. As a result Pidgeley’s interest in the company would increase from 1.66% to 8%.

The ABI is concerned that the management has not demonstrated how the extra remuneration is linked to value. An ABI spokesperson said: “We are not sure how this reward is linked to extra performance”.

The ABI also said the dialogue between the management had been poor in the run up to a vote on the capital restructuring and remuneration issue on September 17.

At least one top-five shareholder is still opposed to Berkeley’s proposal but others such as Scottish Widows and Saad Investments, Berkeley’s largest shareholder, are backing the plan.

The mose recent red top warning issued by the ABI was for a remuneration plan at J Sainsbury. It is thought that the warning led to 30% of shareholders voting against the proposal.