While around a third of that has already been cashed in, The Daily Telegraph understands Fairburn had been offered a chance to remain in post if he agreed to forgo a portion of the £50m of the bonus that is yet to be exercised, but refused.
Persimmon confirmed today that Fairburn would get to keep a set of "restricted" shares that will vest in 2021. But he will have a reduced notice period of two months, meaning the company does not have to keep paying his salary for another full year.
Roger Devlin, Persimmon's chairman, said: "Given the continuing distraction around the scale of his remuneration resulting from the 2012 LTIP, the board believes that it is now necessary for there to be to be a change of leadership."
He noted that since Fairburn took charge in 2013 the company nearly doubled its market capitalisation from £3.4 billion to £7.5b.
But in a call with analysts, Devlin admitted: "The financial outperformance doesn't trump absolutely everything".
Fairburn said: "I had hoped that revealing my plans to create a charitable trust and to waive a proportion of the award would enable the Company to put the issue of the 2012 LTIP behind it.
"However, this has not been the case and so it is clearly now in the best interests of Persimmon that I should step down."
David Jenkinson, a Persimmon veteran who is currently group managing director, will be appointed as interim chief executive while the company hunts for a permanent replacement.
Last month Fairburn faced widespread ridicule after refusing to answer questions about his pay and walking out of an interview with the BBC.
Toby Belsom, of campaign group ShareAction, said: "Institutional shareholders were asleep at the wheel when they approved this scheme. If they are to avoid similar instances, they need to improve transparency on voting practices and become more rebellious."
The row had already forced the resignation last year of Persimmon chair Nicholas Wrigley and remuneration committee chair Jonathan Davie.
Ashley Hamilton Claxton of Royal London said the pay scandal had "cast a long shadow over Persimmon's strong performance for shareholders".
"This saga is a clear example of how a poorly thought out remuneration decision, in this case made six years ago, can have serious consequences for a company and its shareholders."
Separately, Persimmon announced a strong third-quarter trading update, reporting sales 3pc ahead of the previous year.
The company has now sold all of its stock for 2018 and booked £987m of forward sales, 9pc ahead of where it was at this point in 2017.
Along with many of its competitors, Persimmon has benefited from the Government's Help to Buy scheme, which was recently extended until 2023, and the relatively easy availability of mortgages.
Analysts at Peel Hunt said they were confident Persimmon "is continuing to perform strongly in terms of margins", adding that it is "well placed to deliver volume growth next year".
