SHAREHOLDER anger looks likely to cast a shadow over the annual meeting of Cable & Wireless after the Association of British Insurers threatened the telecoms group with an “amber-top” warning about its controversial £220 million pay scheme.
The ABI said that its members had “very little enthusiasm” for a private equity-style bonus scheme proposed by Richard Lapthorne, the chairman, and the company’s failure to fully “link reward with long-term value creation”.
In an attempt to appease concern about the scheme, under which senior executives had stood to secure payouts of up to £22 million each, C&W has made some amendments to its original plans.
The changes, under which individual payouts will be capped at £20 million and any individual payout in the event of a bid for the company would be capped at £10 million until April next year, were detailed in its annual report, published yesterday.
The report showed that the group, which has been dimissing thousands of employees, spent £9 million on salaries, benefits and other payments to existing and departing executives.
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Although the ABI described the amendments to the scheme as “helpful”, it said that investors would need to balance these against their “underlying concern”.
The radical pay scheme, aimed at reviving the fortunes of the struggling group, angered investors in part because the participating executives were not asked to take any personal financial risks, as is traditional in private equity situations. The proposed scheme, which will be voted on at the group’s annual meeting on July 21, also follows the recent dismissals of employees, including Francesco Caio, the former chief executive, and Charles Herlinger, the finance head.
C&W is no stranger to stormy annual meetings. In 2003 a fifth of investors voted against the remuneration policy for its new board.
A spokesman for C&W said: “We have received a strong level of support and understanding for the role of the plan.”
C&W, which is facing intense competition in its core British market, has come under fire for its constant strategy changes. Aside from launching the new pay scheme, Mr Lapthorne has changed the structure of the group, splitting it into two divisions. The company also recently conceded defeat in its attempt to offer broadband internet access to consumers by ending marketing of its Bulldog offering. It had invested millions of pounds in the business.