Shareholders at UK company Cable & Wireless are preparing to oppose the reelection of the company’s chairman Richard Lapthorne. Mr. Lapthorne came under criticism two years ago when he steered through a controversial private equity style LTI plan for Cable and Wireless top executives. These shareholders have since benefited from the rocketing share price and turn around engineered by these same executives and Mr. Lapthorne’s board. Now they are at it again.

The chairman has come in for criticism following a proposal that he be included in a share scheme that could entitle him to 5.5 million shares worth around £11 million at the current share price. The news comes on the back of last month’s announcement that C&W plans to remove the £20 million cap on the sum that can be received by an individual executive as part of a performance incentive scheme.

Several shareholder groups, including the Association of British Insurers, are said to be opposed to the remuneration plans.

The inclusion of chairmen and non-executive directors into performance-based incentive schemes is highly unusual and goes against widely accepted corporate governance guidelines published by ABI and other governance groups. PIRC, a prominent UK proxy firm, also voiced concerns at what it calls the private equity-type bonus schemes in public companies.

As Guerdon Associates indicated in its AFR opinion piece, it takes a courageous board to implement private equity style remuneration in listed companies. But, of all companies in the UK, it seemed to us that C&W was in exactly the right place to receive it. It was in trouble, it needed dramatic restructuring, and it needed appropriate management and incentives to deliver. It seems to have got all of these right and shareholders are benefiting.

On the question of the board having more “skin in the game” we have to admit that we are not close enough to the situation now to offer an opinion, except to say that the boards of private equity companies do tend to have a lot of personal equity in the investment. If C&W are still in a “private equity” space requiring much more work and engagement by the board than in a regular listed company, then what is proposed could well be appropriate.

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