Connected Research

Union policy research in the 21st century

PIRC opposes C&W remuneration report

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According to a report in The Herald, shareholders in C&W have been asked in a client note by corporate governance and shareholder engagement consultancy Pensions Investment Research Consultants to reject the company’s remuneration report at its AGM, due to take place on Friday, and also to oppose the re-election of Richard Lapthorne, company chair.

PIRC believes that Lapthorne’s receipt in 2007 of 5.5m shares under the company’s long-term incentive plan is indicative of executive responsibilities and that this is incompatible with his status as a non-executive director. The Higgs Report in 2003 on the role and effectiveness of non-executive directors was intended to ensure that non-executive directors had a greater role in supervising executive actions, while there is also a clear link here in terms of the role of non-executives in reviewing executive remuneration.

PIRC is also critical of ‘potentially excessive’ private equity-style executive remuneration in the form of the company’s long-term incentive plan, which is linked to the rise in the company’s share price over four years and which, in a separate resolution (which PIRC is also calling on shareholders to oppose), C&W wants to extend for a further year. PIRC notes that the plan is: ‘A cash based incentive of a type usually found in a private equity speciality finance company, whose performance conditions are vague,’ and which, it believes, could see executives receive share awards of four times salary.

The Herald also reports that the Association of British Insurers, whose members hold some 15% of C&W’s listed shares, has also issued a ‘red top’ warning – indicating a breach of corporate governance best practice – in respect of the plan over which, it says, the ABI has heard no defence from C&W’s executive remuneration committee.

At the 2007 AGM, C&W saw 10% of shareholders vote against the removal of a £20m bonus cap.

Edit (21 July): At the AGM, shareholders voted in favour of the resolution on the LTIP but 25% of the votes cast were against and there was a further 16% of the total number of shareholders who did not cast their votes. This indicates that only around 62% of C&W shareholders were actually in support of the resolution. The plan will now pay out in 2011, rather than 2010, so as to take account of market turmoil and a delay in a company demerger plan – both of which are likely to boost the value of the pay-out.


Written by Calvin

15/07/2009 at 2:46 pm

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