No merit in C&W's mega bonuses
Our friends at Cable & Wireless are courting controversy again. This time, its top brass may soon have the chance to scoop a share of £216m in return for turning the struggling company around. An individual director such as John Pluthero could pocket £22m if he manages to help double the company's share price.
The proposed deal enjoys the support of C&W chairman Richard Lapthorne, who says it will inject a much-needed private equity drive into the company. Lining up against it are the unions who say it's an example of outrageous greed, and city analysts who point out that the executives who could cash in via the plan won't actually be risking any of their own money — as would happen in a typical private equity set-up.
It would be wrong to dismiss this plan outright. Top directors should be rewarded for great performance, and C&W's senior executives would have to grow the company's market capitalisation by some £3bn before they hit the jackpot. But of all the companies in the UK telco space, C&W is surely in the weakest position to justify such excess.
Only three months ago, Pluthero stunned his staff with a hard-hitting and arguably ill-advised email in which he revealed that C&W would cutting staff and ditching customers.
"Congratulations, we work for an under-performing business in a crappy industry and it's going to be hell for the next 12 months," wrote Pluthero. Staff who are wondering when the axe will fall are unlikely to be motivated by the thought of top managers scooping lottery-style windfalls. For the captains of this industry, hell will be working out which yacht to buy.
And will customers be encouraged by the idea of these mega-bucks deals? You'd think that C&W would need fantastic customer service and support if it is to double its share price. But Pluthero's February email showed that his masterplan for success is to ditch 90 percent of C&W's customers.
Focusing on big business may make sense, but there must be a concern that C&W will be distracted by the temptation to woo the stock market rather than launch services that its remaining customers actually want.
The other glaring offence on C&W's charge sheet is its management of Bulldog. To be fair, Bulldog was in a bit of a mess even before C&W bought it. But since then the foot has been firmly on the accelerator, driving Bulldog downhill and driving its users to tears. C&W should be sorting out the well-documented problems with billing, customer support and service delivery at Bulldog. Its failure to do so until now is mysterious -- is it because there isn't a whopping bonus attached?
We suggested back in February that C&W might be set to join Marconi in the history books. Nothing that's happened since has changed our view. The aspiring fat cats of C&W may be clinging onto their last lives.