Cable & Wireless hires Italian chief executive on £5m package

Cable & Wireless yesterday ended its search for a new chief executive with the appointment of Francesco Caio, an Italian telecoms veteran, on a bumper three-year pay package worth more than £5m.

The move came as Richard Lapthorne, C&W's recently-appointed chairman, launched an attack on the company's former managers and internal controls.

"I don't think a company could have had the list of announcements that went out and be able to claim it had a first-class system of financial control," Mr Lapthorne said. "I also believe the management – this point of management control – was more likely the cause of the company not getting away with its strategy than the strategy itself."

Graham Wallace, C&W's former chief executive who presided over a string of profit warnings, cleared his desk on Tuesday night and will step down from the board on Friday. He does not yet have an official leaving date, however, and the terms of his severance package have still to be finalised. Mr Wallace, whose salary last year was £775,000, is on a two-year notice period but he is believed to have little chance of having this paid out in full.

His successor, an Italian who founded and headed the telecoms business Netscalibur, is the latest in a list of non-British candidates to head up UK telecoms companies. The Dutchman Ben Verwaayen was made head of BT last year while Arun Sarin, an Indian-born American, recently became chief executive-designate of Vodafone.

Shares in C&W closed up 8.5p at 79.5p last night.

Mr Caio will be paid £700,00 a year with a maximum annual bonus of 150 per cent of salary although he will receive a minimum guaranteed bonus of £375,000 in his first year. He also gets a one-off payment of £375,000 "in recognition of arrangements with Netscalibur" that he is foregoing. This has to be invested in C&W stock and will be matched by the company.

The National Association of Pension Funds, the shareholder group, said yesterday it was against the payment of guaranteed bonuses in general but said it was reserving judgement in Mr Caio's case until it had more details.

Kevin Loosemore, who has been hired as chief operating officer, will be paid £490,000 a year and a maximum annual bonus of up to 100 per cent of salary. Mr Loosemore, formerly the chief executive of IBM UK, joins C&W from Motorola – the US telecoms companywhere Mr Caio is also a director.

Both men, who are on one-year contracts with a two-year notice period for the first year, will be awarded share options of four times their salaries and will also get relocation packages. Mr Loosemore is also investing £375,00 in C&W which will be matched by the group.

Mr Caio remained tightlipped yesterday on what his strategy for C&W, to be revealed in June, would entail. He stressed the importance, however, of "customer focus, cash and accountability".

"This is not an easy task but I feel there are some vibrant parts of this company just waiting to be energised and led in the right direction," he said, adding: "I hope and I believe we will be able to mobilise people within Cable & Wireless and move them from a defensive to an attacker position."

Mr Lapthorne was more forthcoming, however, and said he thought "the adjectives global and regional", the names of C&W's two divisions, would disappear.

He also said Sir Winfried Bischoff, the deputy chairman, would be leaving the board as a non-executive director but that he had asked Janet Morgan to stay on.