Senior colleagues of James Ross, the chief executive, say he is prepared to confront the board with an ultimatum: he will resign unless Young goes completely or, at least, takes more of a back seat.
Mr Ross is understood to have the support of several key colleagues and possibly some big shareholders. Some of the top executives in the communications group have asked for a meeting this week with the non-executive directors to air their concerns.
The sensational rebellion throws Cable & Wireless into a full-blooded crisis. Even before the latest development, investors had become alarmed at the departures of other senior executives and concerned about strategy, which has yet to yield solid results.
One senior executive in the company said: "We can't go on like this. There can only be one chief executive. David [Young] has to stop dabbling."
Mr Ross had expected Lord Young to stand down shortly. Instead, the former cabinet minister announced on Thursday he was staying on for another 15 months "to end the recent ill-informed and destabilising comment, and to put the record straight".
That decision, which was cleared by some of the non-executive directors but not endorsed by the full board, was greeted with horror by Mr Ross and colleagues who support him.
Mr Ross is understood to have the support of the majority of the London- based executive directors. These comprise Rod Olsen, the finance director, Steve Pettit, the director in charge of Europe, Ed Astle, the international services director, and Jonathan Solomon, in charge of strategy.
According to the Ross camp, Lord Young has made life impossible at the top of the telecommunications group because of his "seat of the pants deal-making style". According to one well-placed source, management was constantly being distracted by Lord Young's insistence on striking small deals in obscure markets, including the island of Sakhalin, Kazakhstan, Panama, Latvia and Israel. Some have already proved to be financial disasters.
Potential joint-venture partners in larger growth markets are becoming concerned about stability at the top of the company, according to the source. C&W is currently attempting to negotiate a large deal with a North American company.
Lord Young has acquired a reputation of being a difficult boss. A week ago Duncan Lewis abruptly resigned as head of Mercury, the fourth chief executive to quit in six years. A former C&W chief executive, Gordon Owen, also left recently in a cloud of bitterness and recrimination.
The row leaves the non-executive directors with an unenviable task. As group deputy chairman and chairman of the remuneration committee, Win Bischoff, the well-regarded chairman of the merchant banking group Schroder, is likely to play a key role in resolving the crisis.
Mr Ross may have a key ally in Ulrich Hartmann, a main board director and chairman of Veba, the German telecoms group, which is C&W's biggest shareholder with a 10 per cent stake.
Lord Young, one of Mrs Thatcher's favourites, was a cabinet minister from 1984 till 1989. A year later he became chairman of C&W. He was paid pounds 479,000 last year, down from pounds 777,000 the previous year.
Cable & Wireless has been a poor stock market performer and has had few fans among insitutional investors. One large investor said he had little sympathy for either Lord Young or Mr Ross: "A curse on both their houses," he said. But he added, the key thing was to appoint a new chairman.
The company has seriously underperformed the stock market over the last two years. The shares, which reached a peak of 535p in January 1994, now stand at 417p, underpinned by takeover speculation. This can only increase with news of the boardroom revolution. British Telecom is a potential predator, attracted by C&W's strong Far East presence.
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