C&W bosses find that the shareholders are still revolting

C&W will split later this month. On the 22nd C&W Communications will be listed on the Stock Market and C&W Worldwide will follow in March 26. However, the gilt is being knocked off the gingerbread as the company faces a major shareholder revolt because of a corporate financial incentive policy with targets that, critics say, are too easy to meet and have been set out over far too short a timescale. Indeed several corporate governance agencies have already singled-out the bonus scheme as a prime example of how not to do it properly.

The Long Term Incentive Plan (LTIP), put in place by Richard Lapthorne, C&W's group chairman, is based on the performance of the company's shares between March 2006 and March 2009 and has a total value of £70 million that will be divvied-up handed out to a coterie of senior managers.

John Pluthero, C&W Worldwide's abrasive executive chairman, has already received £8.3 million under the scheme, but he has generously agreed not to take all the cash at one go. So he's had just two-thirds of it and will get the remaining 33 per cent over the next two years.

He's also in line for a big salary rise next year. However, showing commendable restraint he's managing at the moment to struggle along on his basic £600,000 per annum that has been frozen since April 2006. C&W says salaries for the top brass "will be substantially increased" in a few weeks time at the start of April.

Last year C&W shareholders were up in arms over what many regard as excessive pay and bonuses for the company's senior management and almost 40 per cent of them refused to endorse the remuneration committee's recommendations.

They went through of course, mainly on the nod of some big institutional investors, but it left a bad taste with many - and now C&W faces more protests and not just about excessive bonuses. Shareholders are are also exercised about the so-called "golden handcuffs" that will effectively lock senior managers into part of the company long after it is demerged.

Despite the shareholder outrage, C&W is unrepentant.

In a statement the company says "We pay our executives what we consider to be a reasonable rate, in line with their duties and comparable packages at peer companies."

C&W also points out that top management has "increased shareholder returns by 44 per cent since 2006" and the share price has risen by 30 per cent. Meanwhile Richard Lapthorne is adamant that shareholders have benefitted from the LTIP scheme because it has been responsible for the turn-round in the company's fortunes.

If the pool of money in the scheme stays at the £70 million mark (and it might well grow if the share price continues to rise), Mr. Pluthero stands to make at least another £3 million in bonuses.

A revised LTIP will come in to force at the end of this month. Amongst it's provisions is one stating that if, three years down the line, the company's total shareholder return (a combination of share price and dividend payments) increases by a compound rate of 20 per cent per year, Mr. Pluthero will get additional bonuses equivalent to four times his annual salary.

Details of the pay arrangements for C&W's senior management are in the small print of the demerger document.

And it's not just shareholders who are angry, Communication Workers Union spokesperson Andy Kerr, says "John Pluthero is completely out of touch with both the business world and his staff. He should pay this bonus back and give Cable & Wireless workers a decent pay rise. This scandalous bonus culture for senior managers is disgraceful."

Alan MacDougal, of PIRC, the UK's leading independent and consultancy organisation specalising in providing advice to institutional investors on corporate governance and corporate social responsibility, adds that with the bonus scheme, "C&W is encouraging risk because if executives really want these rewards they could be tempted to make decisions that are not in the long-term interests of either the company or its shareholders."

Ah, shades of the the banking crisis - but that's all so last year.

Despite the bonus schemes put in place by the big boys for the benefit the big boys, things aresomewhat different further down the pecking order where C&W is axing 1,900 jobs - allegedly to save money.