Graham Wallace, the former chief executive of Cable & Wireless, is to walk away from the telecoms company with a settlement worth just over £1m. The payout is, however, significantly less than the minimum lump sum of £1.55m that he was legally entitled to under the terms of his two-year contract.
The Association of British Insurers and the National Association of Pension Funds, two powerful shareholder groups who are lobbying hard against rewarding executives for failure, welcomed the terms of Mr Wallace's settlement.
The pay-off, thrashed out over the past two-and-a-half months, will see Mr Wallace get six months' notice - or £387,500 - although that will be paid in monthly instalments, in line with best practice.
On top of that, he is also getting 14 months' of pension contributions - equivalent to £500,000 - although that figure will be paid "over time".
And, even though he cleared his desk at the beginning of April, Mr Wallace remains on the payroll on his full £775,000-a-year salary until 20 July. That means he will get paid nearly £200,000 for his final three months even though he is there only in an "advisory" capacity.
But the package was less than Mr Wallace, who presided over four profit warnings and a plummeting share price, was legally entitled to.
The chairman, Richard Lapthorne, said: "We have reached a rational settlement with Graham Wallace, which is sensible for both parties."
"I'm sure the institutions will be pleased with this," a spokesperson at the NAPF, said adding: "We do like to see payments phased."
Peter Montagnon, the head of Investment Affairs at the ABI, said: "We think it's very good that the company persuaded him [Mr Wallace] to take a substantial reduction ... that said, it is quite difficult to see how anyone can argue in these circumstances that a payment to him was justified."
Cable & Wireless said Mr Wallace would not be awarded any payments under any of its short term or long term incentive schemes.
The move leaves the company with one other major pay dispute to finalise - that of the former deputy chief executive Robert Lerwill, who was also previously finance director.
Mr Lerwill, who was the only other director on a two-year contract, also remains on the company's pay roll. He is paid £400,000 a year. A spokesperson for Cable & Wireless said yesterday that negotiations over his settlement were "ongoing".
Separately, the company also said that it had sold parts of its business in Germany to private equity firm Arques as part of its restructuring programme. The disposal, it said, was part of its strategy to focus on multinational enterprises and service providers in continental Europe and to withdraw from providing domestic only services. The value of the net assets being sold is about €2m.
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