Taylor Wimpey CEO cancels own planned purchase of discounted luxury flat

The Chief Executive of housebuilder Taylor Wimpey has withdrawn from his planned purchase of a luxury flat in central London valued at £2.5m. The property was due to be sold to him at a discounted price of £2.04m but, after being reported in the national press, the proposed purchase is now not going ahead.

This decision not to proceed with the purchase is another example of the potential reputation issues which can arise in relation to the reporting of executive remuneration and benefits, following the recent example of fellow housebuilder Persimmon Homes to award its CEO a bonus of £75m last year, which led to his subsequent departure from that role.

There has been increased scrutiny of executive pay over the last few years and the number of reviews, reports and proposed reforms suggest that the topic is not going away.

Directors when considering whether to afford a generous benefit to a fellow director have to consider various provisions under the Companies Act 2006. As with all decisions Directors have to consider all their duties which includes the obligation on each director to act in a way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole (having regard to the non-exhaustive list of matters set out in the Companies Act, including the desirability of the company maintaining a reputation for high standards of business conduct).

Where company assets are involved (as was the case here) transactions between a company and its directors, which involve assets above certain monetary amounts, require shareholder consent. Additionally, shareholders can seek to influence company decision-making relating to executive remuneration and benefits by use of their voting rights, and such "shareholder activism" can be effective in curbing executive decision-making which elements of the shareholder base do not agree with.