When £20m just isn't enough

Jun 07 2007 by Brian Amble Print This Article

Just when you thought that shareholder activism and concerted political pressure was starting to have a sobering effect on executive pay, along came private equity.

As Nils Pratley writes in the Guardian, "the fact is that bonuses at public companies will continue to escalate as long as the private equity boom continues. "Give me more or I'm off," is the mood of the moment, and there seems to be no shame in holding a gun to investors' heads."

That's exactly the attitude of the board of telecoms giant Cable & Wireless, who are demanding limitless bonuses for top executives – currently, payouts are capped at a mere £20m ($40m) per individual.

The new proposals could also see the company's part-time Chairman, Richard Lapthorne, pocket £11m in three years' time if the firm's share price stays on track.

"Don't C&W's management know that their basic salaries alone require them to do their jobs well?" Pratley asks plaintively. But what a quaint idea that seems in today's climate.

Meanwhile, the company has claimed that the £20m bonus cap "is inconsistent with the objective of maximising shareholder value".

As Pratley says, it would be nice to think that C&W might be the moment when fund managers stand by their threats of rebellion. But don't bet on it.