Fears Vodafone bonus plan could spark shareholder revolt

Mobile phone giant Vodafone risked sparking a fresh shareholder backlash today after it outlined plans to lower the targets in its executive bonus scheme.

The group is asking investors to back proposals to further reduce the performance target hurdles required for directors to qualify for share options under long-term bonus schemes, despite coming under fire last year for a similar move.

More than 10% of shareholders voted against Vodafone’s pay plans last year after it was revealed the group wanted to reduce targets.

A further 15% abstained in the vote at its annual general meeting.

But now the group is proposing to slash the targets further when it meets for this year's AGM on July 24.

The group defended its decision to reduce the share option target for earnings per share growth from between 5% to 10% to a range of 5% to 8%, saying it was a “stretching target compared with analyst consensus forecasts”.

Last year the group cut the target from between 8% and 16% to the lower range of 5% and 10%.

Details of Vodafone’s bonus plan, revealed in the company’s annual report, also show that Vodafone chief executive Arun Sarin received 8.1 million share options under the three-year incentive scheme last year.

He was also awarded a potential £2.9m (€4.3m) in shares, dependent on performance over three years to July 2009, on top of salary and annual bonuses worth £3.2m (€4.7m) in the year to March 31.

Vodafone is the latest company to risk sparking shareholder outrage over bonus plans, with fellow telecommunications firm Cable & Wireless also in the spotlight.

C&W is reportedly facing opposition from leading shareholders over plans to offer its chairman up to 5.5 million bonus shares as part of a three-year incentive scheme. It also attracted widespread criticism for proposals to offer executives unlimited windfalls.

Vodafone, meanwhile, is already facing pressure from shareholders over its share price performance, with calls for a restructuring of the group.

Efficient Capital Structures, which is owned by a group of Vodafone investors including former Marconi director John Mayo, last week sent the mobile phone firm a list of resolutions it wants put to vote in the AGM next month.

ECS claims that Vodafone’s share price has underperformed in the FTSE 100 Index over the past five years by 28% and is calling for a more efficient capital structure to improve future earnings.