Two opposing camps of thought have emerged in the UK pensions industry about the new executive share incentive scheme at Cable and Wireless.
While the Local Authority Pension Fund Forum (LAPFF) is urging its members to vote against the scheme at the Cable & Wireless’ AGM on July 20 - due to weak performance targets - the National Association of Pension Funds (NAPF) is standing behind it, saying that executive directors will be subject to “challenging” performance conditions.
The ‘Incentive Plan 2001’ has two main elements: share option awards and incentive share awards:
- Option awards of up to six times salary may be made annually (up to ten times in some cases). The company’s total shareholder return (TSR) will be measured against other global telecoms companies. For median TSR against this group, 50% of options will be exercisable with an estimated expected value of 105% of salary – equivalent to £794,000 for the current Cable and Wireless chief executive, Graham Wallace.
- In addition, annual awards of incentive shares equivalent to salary can be made. For the same median TSR performance, 40% will vest with an estimated value of £302,340 for the chief executive.
A survey conducted by Meis, consultants for the NAPF, found that the share option plan allows Cable & Wireless flexibility in its grant policy in both the UK and overseas.
It said: “While the maximum grant level is well above rate, the initial grant of options to the CEO and executive directors will be subject to challenging performance conditions, albeit with an extended performance period.”
Opposing the share option plan, LAPFF spokesman Stuart Bell said: “Participants could get nearly one-and-a-half times their salary for coming half way in the race. This cannot be a challenging target.
“LAPFF members find it unacceptable for companies to transfer shareholder wealth to executive directors for the achievement of average performance. This is one of the worst schemes we have seen proposed this year.”
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