C&W bosses to get unlimited bonuses

C&W bosses to get unlimited bonuses


· Angry shareholders fail to block remuneration policy
· £20m cap on individual rewards is removed

Richard Wray
Saturday July 21, 2007
The Guardian

http://business.guardian.co.uk/story/0,,2131425,00.html

Cable & Wireless faced down opposition from shareholders yesterday over
its controversial plan to ditch the cap on its executive remuneration
policy, a move that could see top bosses claim tens of millions of pounds.

At C&W's annual meeting in London, the company faced noisy opposition. One
shareholder blasted the plans as "fanciful". Another added: "You have to
deliver to get more money from us." In the end, only 17.5% of shareholders
who voted refused to back controversial plans to remove limits on the
bonuses payable to John Pluthero and Harris Jones, who head the firm's UK
and international operations.

The protest vote was lower than at last year's annual meeting when 21% of
shareholders refused to back the entire four year remuneration scheme when
it was originally introduced. Yesterday, 11% of those voting refused to
back the re-election of chairman Richard Lapthorne to the board, in
protest at his own controversial remuneration package. Earlier this year
the board placed Mr Lapthorne in a scheme that could be worth £11m if he
hits his targets, to keep him at the helm. Shareholders were not, however,
given the opportunity to vote directly on this plan and were only able to
register their fury by not voting him back onto the board.

There was further evidence of the anger among investors about executive
pay in the votes cast at the meeting, as almost 10% refused to back the
re-election to the board of its senior independent director, Clive Butler.
Separately 10% of those who voted refused to accept the firm's entire
remuneration report.

The caps on the amount that C&W's four year executive pay scheme can pay
Mr Jones and Mr Pluthero were introduced at the eleventh hour last year to
gain institutional investor support. They capped the amount the two men
can claim at £20m each.

John Farmer, a small shareholder, told yesterday's meeting that the
removal of the caps, which will allow Mr Pluthero and Mr Harris to collect
unlimited bonuses, would create a "fanciful remuneration scheme". He
rejected the company's argument that the caps must be removed as recent
share price rises mean that the pair are already close to collecting the
maximum bonus. "You have appointed and dismissed one chief executive, so
the present lot are your second go at the cherries," he told Richard
Lapthorne, referring to the dramatic departure of chief executive
Francesco Caio in early 2006. "Surely, chairman, this and your rather
patchy performance is not a justification for, in your words, private
equity-style remuneration to yank up the performance of the generally
underperforming company."

Mr Lapthorne gave a lengthy defence of both the lifting of the bonus caps
and his own pay scheme. He stressed that no money will be paid out until
2009 at the earliest, whereas shareholders can benefit whenever they wish
by selling their shares. "You, if you want to, can cash in whenever.
Neither of our managers can," he said. He admitted, however, that he had
"no expectation when I put the scheme in place last year that it would
reach this level of performance so fast".

He explained that his own pay scheme was put in place to keep him at the
company when his fixed-term contract expires. "I was due to leave here at
the end of next year. But, with everything we are doing we concluded that
could be very unfortunate timing relative to when we would be making
decisions," said Mr Lapthorne. He later explained that these key decisions
were concerned with a possible demerger or trade sale of the business,
which management expect to consider late next year.

"I could have been granted an increase in salary and an increase in bonus
but I don't believe in that ... I am here to add value for you," he told
shareholders. He said that to get his full reward the business would have
seen its market value increase to £8bn, compared with £4.5bn today and
£1.1bn when he joined in 2003. Mr Pluthero said later: "I want to get paid
fairly for what I do."

At a glance:

Under the four-year scheme, which C&W put in place last year, John
Pluthero, above, and Harris Jones get 100% of their bonus if C&W's share
price reaches roughly 228p by 2010. At that level they collect £20m
apiece. But the cap on it meant neither man would get more cash if the
shares rose further. Yesterday the shares closed at 182p. Now shareholders
have voted to remove the caps, there is no limit to what Mr Pluthero and
Mr Jones could pocket.
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