The chairman of Cable & Wireless yesterday insisted it needed to offer private equity-style rewards to its management if the telecoms business is to recover.
Richard Lapthorne, announcing a sharp fall in annual profits and the abandonment of its £250m share buyback programme, was forced to defend a controversial new incentive scheme for its top 200 managers. The scheme could provide them with equity worth almost £240m. He suggested C&W would fall prey to private equity groups if management was not sufficiently rewarded.
The plan has yet to be approved by shareholders and there are signs of some opposition. John Pluthero, the head of the UK business, and Harris Jones, who runs the international interests, could pick up a maximum of £22m each.
Mr Lapthorne said: "Why let private equity pick up the value if we haven't the courage to adapt their tools?"
At another point however, he said private equity was unlikely to buy C&W. "This [incentive scheme] is a very powerful tool that shouldn't be underestimated ... As a shareholder, I would love to pay this out. That's because I would be so much richer," Mr Lapthorne said.
Under the scheme, management is entitled to 6 per cent of the upside if it gets total shareholder return - the share-price increase plus the dividend payments - up to 198p over the next three years. Yesterday's closing price was 97.5p, down 2.5p, giving the company a stock market value of £2.3bn. If the total shareholder return gets to 228p, management is entitled to 7 per cent of the increase in value - around £3.4bn would have been added to the stock market value - which would be worth £238m.
The company reported that pre-tax profits for the year ended 31 March fell to £112m, from £167m previously. There was an operating loss of £67m - from a £131m profit in the previous year.Reuse content