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Richard Lapthorne, chairman of Cable & Wireless, faces an investor backlash over controversial pay proposals by the telecoms company last week.

Several leading shareholders have threatened to vote against the re-election of Mr Lapthorne at next month’s general meeting in protest. His planned bonus could pay out 5.5m shares within three years, worth about £11m at the current share price.

Investors also said they would vote against proposals to scrap limits agreed last year on bonuses for top executives.

Growing opposition emerged at a meeting this week of the investment committee of the Association of British Insurers, which represents most of the UK’s largest investors.

“The C&W proposals have resulted in a wide range of differing views but have also raised more fundamental governance questions such as how should you reward a chairman and should there be caps on incentive schemes?” said Anita Skipper, head of corporate governance at Morley Fund Management.

Shareholders have serious concerns over C&W’s decision to include Mr Lapthorne in a performance-related incentive scheme.

C&W said last week it wanted to lift the £20m cap on individual bonuses for executives. The cap was introduced last year after shareholders opposed the company’s plan to pay “private equity-style” rewards. The rewards were to come from a pool of cash that could be worth more than £200m if the company beat certain targets.

The group has secured support for the scheme from some of its biggest investors in recognition of the fact that the share price has doubled in a year after several years of poor performance.

But several shareholders are concerned that paying a performance-related bonus to a chairman contravenes corporate governance best practice.

One shareholder said: “People feel this is a test case. It is pushing too hard for too much. It is presented as a private equity-style scheme . . . [but with] no downside.”

A leading investor said shareholders had accepted last year’s scheme only because the cap was in place. “They now feel the company has broken the agreement. It shows it was a badly constructed scheme in the first place. We are unhappy with the governance structure of the board. The executives are too strong and the non-executives are not strong enough.”

C&W said: “We believe that the proposed changes are in the best interests of all shareholders and will receive the requisite support at the AGM.”

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