Vodafone defies shareholders and offers Gent £7m package

Sir Christopher Gent, Vodafone's chief executive, could receive a total pay packet worth as much as £7m this year if the company's share price doubles from current levels and if the business hits all its financial targets.

He is likely to see a small rise in his £1.2m basic salary this year and could also gain a short-term bonus of just over £1m as well as a long-term bonus worth some £5m.

His potential earnings, detailed in the company's annual general report, are still likely to upset shareholders who have nursed heavy losses as the stock collapsed. They also come less than a month after the company posted a £13.5bn loss, the biggest in UK corporate history. Vodafone shares closed down 0.75p at 92.5p last night, having traded as high as £4 a share at the peak of the internet boom in 2000.

Still, the mobile phone operator, which has revamped its policy on directors' pay, defended its new scheme. "Some of the feedback we got from shareholders was they wanted very clear alignment between the chief executive's reward and their experience with the share price. This clearly illustrates that he only benefits when they benefit. If the share price doesn't move, none of the long-term incentives pay off effectively," a company spokesman said.

Details of Sir Christopher's potential future earnings came as it emerged he earned £2.4m in the year to 31 March, comprising a £1.2m salary and a £1.2m bonus. In the previous year, he earned £6.88m. During the year, he was also granted 8.9 million share options at 157p a share each as well as £844,000 worth of shares now valued at about £489,000.

The company also confirmed yesterday that Sir Christopher had been granted the second half of a controversial bonus agreed two years ago. He will receive 1.76 million shares, which have since fallen in value to £1.6m from £5m, at the beginning of next month.

The bulk of those shares come on top of the £5m cash bonus he pocketed last year. "The bonus was set two years ago in April 2000 and it was a catch-up bonus reflecting the fact that the size of the company had quadrupled in a very short period of time with the Airtouch merger and the Mannesmann acquisition," a spokesman said. "The targets [relating to that award] have been achieved."

Vodafone said yesterday its new pay policy had garnered support from both shareholders and industry bodies such as The Association of British Insurers, The National Association of Pension Funds and The Pensions Investment Research Consultancy (Pirc).

Under the new scheme, Vodafone said it had benchmarked total remuneration levels against large European companies. Sir Christopher would be paid between the top 25 and 10 per cent of remuneration levels of leading European chief executives, which, it said, ranged from £3.4m to £9.3m a year. The equivalent range for US companies, it said, was £22.5m to £45.5m a year.

Remuneration levels for other executive directors will be set at about 50 per cent of the chief executive's level while the chief operating officer's level will be approximately 54 per cent.

While Pirc said it welcomed the company's responsiveness to shareholder concerns, it said it had not endorsed the new policy. "Indeed in meetings and correspondence with the company, we have reiterated ongoing concerns in line with PIRC's policy positions," it said.