C&W chief could earn pounds 1.7m following `golden handcuff' package

Cable & Wireless has doubled the share bonus package of Dick Brown, its chief executive, and raised his salary by a third, in an attempt to prevent him from moving to another job. Chris Godsmark, Business Correspondent, reports on a scheme which could see Mr Brown earn pounds 1.7m in this year, but only if he stays on at the company for three years.

Leading shareholders in C&W were told of Mr Brown's pay increase in a recent letter, as the company attempted to gauge reaction to a package which would give him a minimum annual share bonus worth 80 per cent of his salary. The new pay award amounts to a "golden handcuff" arrangement to encourage the Mr Brown, a US citizen who joined C&W in July 1996, to stay at the helm until 2000.

C&W launched the review after fears that Mr Brown would be approached with a job offer from AT&T, the world's second largest phone company. AT&T has been searching for a new chief operating officer after the surprise resignation of John Walter in July. Mr Walter, who was paid $22m when he joined AT&T last year, left after being refused the chairman's job.

It is understood that Brian Smith, C&W's chairman, appointed outside consultants to review Mr Brown's pay the day after Mr Walter resigned. They measured his salary against other international telecommunications companies, including MCI and AT&T, and found Mr Brown's compared "very unfavourably". C&W declined to comment on whether he had actually made it on to AT&T's shortlist.

C&W yesterday confirmed the details of the package, which included raising Mr Brown's basic salary by a third, from pounds 487,500 to pounds 650,000. The increase took effect during the current financial year, which started on 1 April, despite the fact that some investors have yet to give the company their verdict.

It is the share bonus element of the package which is likely to prove the most controversial. C&W has doubled the total possible share bonus award under its long-term incentive plan from 60 per cent to 120 per cent of salary. The new bonus scheme would only take effect if Mr Brown stayed with C&W for three years.

The increase, which applies solely to Mr Brown, could see him awarded C&W shares worth up to pounds 780,000 this year. To gain the maximum bonus, C&W's earnings have to grow at 15 per cent above inflation over a three- year period. No changes were made to the performance targets during the pay review.

Most surprisingly, the minimum award of shares possible under the scheme has gone up from 10 per cent of salary to 80 per cent, almost guaranteeing Mr Brown a pounds 520,000 share bonus, compared with just pounds 65,000 under the old scheme. The minimum award is paid out if C&W's earnings grow at 2.5 per cent above inflation over a three-year period.

Under the existing remuneration scheme Mr Brown is also entitled to an annual cash bonus on top, worth up to 40 per cent of salary, which would give him another pounds 260,000. Taken together, the basic salary and short and long-term bonus plans would give Mr Brown a pounds 1.69m pay packet this year, assuming C&W meets the top performance criteria. He was paid pounds 1.24m last year, including a pounds 306,517 relocation allowance.

It would make him one of the best paid chief executives of a company in the FTSE 100 share index. Sir Peter Bonfield, chief executive of British Telecom, is on a pounds 570,000 salary, while Sir Iain Vallance, executive chairman, is paid pounds 500,000.

Sources close to C&W indicated big shareholders were mostly happy with the bonus scheme. But one investor canvassed yesterday warned that the increase in the minimum share bonus, with no rise in performance targets, was worrying. "I suspect it's a rather large bonus payment for pretty mediocre performance targets. We would like to see the targets based on peer group comparisons in the telecoms industry and total shareholder returns, including share price increases."

C&W said Mr Brown's success in his first year had made him a "highly marketable international chief executive". Mr Smith continued: "The chairman's job is to get the best talent and to keep it. I don't want another head- hunting exercise."

The company's prospects have improved markedly under Mr Brown, who joined after the high-profile resignations of Lord Young, chairman, and James Ross, chief executive. He swiftly put together deals to merge Mercury Communications, C&W's main UK business, with three cable companies and secured an agreement with China over the future of Hong Kong Telecom, C&W's most lucrative cash cow. Over the past year C&W's share price has risen by 33 per cent.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
musicOfficial chart could be moved to accommodate Friday international release day
Wes Brown is sent-off
Italy celebrate scoring their second try
six nations
Glenn Murray celebrates scoring against West Ham
footballWest Ham 1 Crystal Palace 3
Arts and Entertainment
Drake continues to tease ahead of the release of his new album
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower