Pension fund members of the UK's Local Authority Pension Fund Forum (LAPFF) are being urged to vote against a new executive share incentive scheme at Cable & Wireless' AGM on July 20 due to weak performance targets.
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 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.
Stuart Bell, LAPFF spokesman 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.
The LAPFF has guidelines on new share schemes, agreed in January, which oppose share schemes which vest at median point for more than 40% of salary or where options become exercisable for earnings growth of 3% per annum or less.
The Forum comprises 26 pension funds with more than £45bn in combined assets.
A spokesman for Cable & Wireless said the company was “unable to understand the methodology behind the numbers the LAPFF quote. Because the scheme does not vest options below the median we believe it is a good scheme to incentivise.”
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