Big Guns Act to Block C&W 'Fat-Cat Payoff'

By Hosking, Patrick | The Evening Standard (London, England), December 12, 2002 | Go to article overview

Big Guns Act to Block C&W 'Fat-Cat Payoff'


Hosking, Patrick, The Evening Standard (London, England)


Byline: PATRICK HOSKING

THE big battalions of the City today moved to prevent a potential pound sterling2 million payoff to Graham Wallace, the embattled chief executive of imploding telecoms group Cable & Wireless.

The Association of British Insurers and the National Association of Pension Funds rushed out a new statement of best practice on severance pay in a bid to stamp out what they called rewards for failure.

Although work on the code has been going on for the past year, the timing of the announcement is thought to be a warning shot to the C&W non-executive directors not to countenance a generous payoff to Wallace.

Peter Montagnon, head of investment affairs at the ABI, said his members had reacted with "consternation and dismay" to the latest news coming out of C&W, which it emerged last weekend had for three years concealed a potential pound sterling1.5 billion tax liability from its shareholders.

While the ABI would not ask any company to renege on a contract, he said, "moral suasion" had in the past helped reduce big payoffs. " Extravagant payoffs are highly damaging to the reputation of companies which sanction them, as well as being costly to shareholders," he said.

Separately, the ABI has written to the Financial Services Authority asking for an investigation into whether C&W infringed listing rules by concealing the liability.

Wallace, who has overseen a Marconi-like collapse in C&W's value from pound sterling37 billion to pound sterling1 billion, is expected to be sacked as soon as a new chairman can be found to wield the axe, if not before. Last night the company was removed from the FTSE 100.

Wallace was paid pound sterling956,000 last year and pound sterling1.67 million the year before. He is on a two-year rolling contract, so could demand a payoff of as much as pound sterling2 million. …

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