Directors could get £46m payout if they restore Marconi's fortunes

Three directors at Marconi could get a payout worth a combined £46m if they manage to restore the fortunes of the troubled telecoms equipment maker and turn it into a business worth £1.5bn in five years' time.

The incentive scheme, laid out in an 800-page document detailing the company's rescue plan, came as Marconi confirmed that its long-suffering shareholders would see the value of their stock all but wiped out and would get just 0.5 per cent of the restructured business.

Under the executive incentive scheme, Marconi's chief executive Mike Parton will receive options over 17.5 million shares which could be worth £26.25m in five years' time. John Devaney, the chairman, gets options over 3 million shares, potentially worth £4.5m, while Mike Donovan, the chief operating officer, gets options over 10 million shares, potentially worth £15m.

Nine per cent of Marconi Corporation – the restructured business – has been set aside for the scheme which will benefit 60 executives including the chairman, chief executive and chief operating officer. A further 3 per cent of the equity has been set aside for a separate option scheme for a further 250 staff.

Both schemes hinge on the company hitting certain debt reduction targets and, ultimately, on it reaching a market capitalisation of £1.5bn in about five years' time.

Mr Parton, who earns £525,000 a year and who has already received a £600,000 cash payout for his part in the company's restructuring so far, had to forfeit a cash payout of about £300,000 to benefit from the new scheme. In an effort to break with the past, he has also insisted that his contract be changed to ensure that he will not get any compensation for loss of office if he leaves Marconi "due to underperformance".

But the story is far grimmer for Marconi's shareholders. They will get just one share in Marconi Corporation for every 559 shares they hold in the current Marconi plc. They will also get one warrant in Marconi Corp for every 56 shares they hold in Marconi plc although those warrants will be worth nothing unless shares in Marconi Corp rise above 150p.

Shares in Marconi, which closed down 9 per cent at 2p last night, have collapsed in the wake of a string of profit warnings that left the once highly-regarded company on its knees. In September 2000, the stock traded as high as £12.50, valuing the group at more than £30bn.

Under the terms of the rescue plan, Marconi's bondholders and banks will seize control of 99.5 per cent of the business and will get a cash payout of £340m in return for agreeing to cut the company's debt to £788m from about £4bn. The move means Marconi Corporation will emerge from the process with debt of £788m or net debt of £186m taking into account a £602m cash pile.

However, the company, whose financial restructuring has taken about a year to complete, also warned yesterday that trading remained tough and that it expected sales to drop by about 5 per cent next year.

"Management is committed to bringing Marconi back to full health, which is likely to take time to achieve," Mr Parton said, adding: "We are very clear about our objectives for the business and increasingly confident about the group's future."

Marconi's restructuring documents, which have been filed with the High Court, should be posted to creditors over the course of the next week and a half. They will vote on the plan next month after which a court will need to sanction the scheme.

Marconi expects last day dealings in the old "plc" shares on 16 May and expects trading in the new "corporation" shares to start on 19 May. The stock should be listed on the US Nasdaq exchange in the third quarter of the year.