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Top managers at Cable and Wireless are in line to receive unlimited bonuses under controversial pay plans the telecoms company unveiled on Wednesday.
The proposals represent a U-turn after the company imposed a £20m cap on individual executives’ rewards from a “private equity” style incentive plan last year.
Shareholder opposition to the plan, which could pay executives up to £216m in 2010, as a bonus for turning the group round, forced C&W to cap individual bonuses.
But the company, whose share price has doubled in a year, said yesterday the bonus cap was “inconsistent with…maximising shareholder value”. It is seeking shareholder approval in July.
C&W has also included Richard Lapthorne, chairman, in a new scheme that could pay him a 5.5m share bonus in three years’ time if the company’s performance ranks in the top 10 per cent of a peer group of other telecoms companies.
At Wednesday’s share price, this would be worth £11m. Mr Lapthorne gets nothing if the performance ranks as average.
Shareholders said Mr Lapthorne’s bonus ran counter to corporate governance standards.
But Clive Butler, senior non-executive director of C&W, said: “The board considered it a priority to secure Richard’s continuing contribution to the turnround.”
Peter Montagnon, director of investment affairs at the Association of British Insurers, said: “There is not currently much overall enthusiasm for this proposal, although given the unusual circumstances, views are mixed.
“The cap which has been removed was an integral part of last years’ carefully negotiated arrangement.”
It is understood that investors owning about 40 per cent of C&W shares, including Standard Life Investments, have indicated their support. But one shareholder said that C&W’s proposals had wider implications. “This is going to be divisive.”
Jeannie Drake, deputy general secretary of the Communication Workers Union, speaking at the union’s annual conference, said: “Is there no limit to Mr Lapthorne’s cheek and shareholders’ gullibility?”