Marconi's chief executive Mike Parton will receive a share option package worth an estimated £10m this year, after the telecoms equipment manufacturer yesterday hit performance targets by selling part of its US operation and wiping out its short-term debt.
Marconi last year left investors almost wiped out in a dramatic £3.1bn debt for equity swap. Mr Parton is among 50 top managers at the company who will share a free options package worth an estimated £55m this year. They can exercise the options - which will be awarded in May, August and November - and sell the shares whenever they choose.
Another 250 managers will be granted options but will have to pay for the shares. In total 6% of the firm could be in the hands of senior employees by the end of this year.
Mr Parton yesterday defended the awards, saying the board had made no decision about whether to exercise their options and sell the subsequent stock.
"The performance targets were set with our creditors about 18 months ago and they were considered to be very stretching. Everybody in the company has worked very hard and we are very pleased with our performance."
The company yesterday announced it is raising £135m through the sale of its Texas-based access products business to Advanced Fibre Communications.
The operation was part of Reltec which Marconi bought for $2.1bn (£1.2bn) in 1999 during an ill-fated spending spree which effectively bankrupted the business when demand slumped two years ago.
The sale proceeds will pay off the last £105m worth of Marconi's expensive short-term debt several months ahead of schedule. Getting to grips with this debt was a condition for awarding performance shares. The company owes £430m in long-term debt but believes this is manageable.
As a result of the sale and successfully meeting the group's debt reduction target, Mr Parton will receive 1.75m free share options in three tranches this year. At yesterday's closing share price these are worth just over £10m. Chairman John Devaney will get 300,000 free options with chief operating officer Michael Donovan collecting 1m.
A further 6% of the firm could be passed over to the 300 employees over the next two years if they meet another set of performance targets based on getting the market capitalisation of Marconi, once worth more than £35bn, first to £1bn and then to £1.5bn.
Mr Parton looks likely to collect a further 700,000 free options in August 2005 as the company is already worth more than £1bn. If the company's value increases by a further £500m he will collect his final batch of 1.05m shares the following August.
The sale of its US access business leaves Marconi with one non-core asset to sell - its outside power and plant business, also based in the US.
Mr Parton said yesterday that Marconi's core communications equipment business is on track to record sales in the three months to end December higher than the £389m made in the preceding three months.
Marconi's shares added 20p to 617p on the news. Mr Parton added that spending on equipment by its customers has stabilised after several years of decline.