BT 2006 Annual Report Download - page 56

Other benefits
Other benefits for the Chairman and the senior management
team include some or all of the following: company car, fuel or
driver, personal telecommunications facilities and home
security, medical and dental cover for the director and
immediate family, special life cover, professional subscriptions
and personal tax planning and financial counselling. The
company has a permanent health insurance policy to provide
cover for the Chairman and certain executive directors who may
become permanently incapacitated.
Service agreements
It is the policy for the Chairman and executive directors to have
service agreements providing for one year’s notice. It may be
necessary on recruitment to offer longer initial periods to new
directors from outside BT, or circumstances may make it
appropriate to offer a longer fixed term. All of the service
agreements contain provisions dealing with the removal of a
director through poor performance, including in the event of
early termination of the contract by BT. Sir Christopher Bland’s
contract expires at the conclusion of the AGM in 2007. On
termination of his contract by BT before that date, he is entitled
to payment of salary and the value of benefits for the period of
12 months from date of termination, or until the conclusion of
the company’s AGM in 2007 if that period is shorter. Ben
Verwaayen’s contract entitles him on termination of his contract
by BT to payment of £700,000. The contracts of Andy Green,
Hanif Lalani, Ian Livingston and Paul Reynolds entitle them on
termination of their contract by BT to payment of salary and the
value of benefits until the earlier of 12 months from notice of
termination or the director obtaining full-time employment. If
the contract of an executive director (other than that of the
Chairman and Hanif Lalani) is terminated by BT within one year
of BT entering into a scheme of arrangement or becoming a
subsidiary of another company, he will be entitled to receive the
higher of that current year’s on-target bonus or the previous
year’s bonus, the market value of shares awarded under an
employee share ownership plan or deferred bonus plan that
have not vested, together with a year’s salary and the value of
any benefits.
The Committee has reviewed contracts taking into account
the joint statement of best practice on executive contracts and
severance by the Association of British Insurers and the National
Association of Pension Funds, and other relevant guidelines,
and believes that contract terms are generally in line with best
practice. The clause described above dealing with termination
following BT entering into a scheme of arrangement or
becoming a subsidiary of another company will be excluded
from contracts for new appointments, as was the case for
Hanif Lalani.
Outside appointments
The Committee believes that there are significant benefits, to
both the company and the individual, from executive directors
accepting non-executive directorships of companies outside BT.
The Committee will consider up to two external appointments
(of which only one may be to the Board of a major company),
for which a director may retain the fees. Ben Verwaayen as a
non-executive director of United Parcel Service (UPS), receives
an annual fee of US$75,000. On joining UPS’s Board on
17 March 2005, he received 336 shares of restricted UPS
common stock amounting to US$25,000 and a further grant of
1,180 shares of restricted stock on 9 May 2005, amounting to
US$85,043. Ian Livingston receives an annual fee of £38,000
as a non-executive director of Ladbrokes plc (formerly Hilton
Group plc). Paul Reynolds, as a non-executive director of
E-Access in Japan, receives an annual fee of ¥3,204,000
(approximately £15,600). He was granted an option over 250
shares at ¥76,565 (approximately £367) per share on
1 July 2005. Andy Green was appointed a non-executive
director of NAVTEQ in the US on 16 March 2006. He is entitled
to receive an annual fee of US$40,000, stock options to the
value of US$60,000 and restricted stock units to the value of
US$30,000.
Non-executive directors’ letters of appointment
Non-executive directors have letters of appointment. They are
appointed for an initial period of three years. During that
period, either party can give the other at least three months’
notice. At the end of the period the appointment may be
continued by mutual agreement. Further details of appointment
arrangements for non-executive directors are set out in the
Report of the directors. The letters of appointment of non-
executive directors are terminable on notice by the company
without compensation.
Non-executive directors’ remuneration
Eight of the directors on the Board are non-executive directors
who, in accordance with BT’s articles of association, cannot
individually vote on their own remuneration. Non-executive
remuneration is reviewed by the Chairman and the Chief
Executive and discussed and agreed by the Board. Non-
executive directors may attend the Board discussion but may
not participate in it.
The fees paid to non-executive directors were increased with
effect from 1 January 2004 to reflect their increasing
responsibilities and time commitments.
The basic fee for non-executive directors is £40,000 per
year. An additional fee for membership of a Board committee is
£5,000 per year and a further £5,000 for chairing a committee.
Sir Anthony Greener, Deputy Chairman and senior non-
executive director, who also chairs both the Remuneration
Committee and the Audit Committee, receives total fees of
£115,000 per year. In recognition of the greater commitment
required, during the year it was agreed that Maarten van den
Bergh and John Nelson should receive an annual fee of £5,000
as members of the Pension Scheme Performance Review Group
and Maarten van den Bergh should receive an additional
£5,000 per annum as chairman of the Group. Carl Symon
receives an annual fee of £50,000 as chairman of the Equality
of Access Board (a Board committee), which was established on
1 November 2005.
To align further the interests of the non-executive directors
with those of shareholders, the company’s policy is to
encourage these directors to purchase, on a voluntary basis,
£5,000 of BT shares each year. The directors are asked to hold
these shares until they retire from the Board. This policy is not
mandatory.
No element of non-executive remuneration is performance-
related. Non-executive directors do not participate in BT’s
bonus or employee share plans and are not members of any of
the company pension schemes.
BT Group plc Annual Report and Form 20-F 2006 Report on directors’ remuneration54