BT 2013 Annual Report Download - page 81

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Governance
Governance 79
Governance
Governance 79
Remuneration in 2012/13
This section sets out the implementation of executive director
remuneration for 2012/13.
Salaries
Salaries are reviewed annually. The executive directors requested that
the committee not consider them for any salary increase for the year
2012/13. Accordingly executive director salaries were not increased
during the year. The salaries paid to the executive directors are set out
on page88.
Annual bonus
Executive directors were eligible for an annual bonus based on corporate
performance targets, ESG measures and individual targets. The customer
service element of annual bonus is only paid if a minimum adjusted EPS
threshold is achieved. The annual bonus is paid in two elements, a cash
element, and a deferred element paid in shares as set out below.
Level of bonus for executive directors
Chief Executive
Other
Executive directors
Annual cash bonus Target 125% salary
Maximum 200% salary
Target 100% salary
Maximum 150% salary
Deferred bonus in
shares
Target 125% salary
Maximum 200% salary
Target 75% salary
Maximum 112.5%
salary
Total bonus Target 250% salary
Maximum 400% salary
Target 175% salary
Maximum 262.5%
salary
The annual bonuses in 2012/13 were assessed by the committee on a
number of factors. The annual bonus structure for 2012/13 was:
Chief Executive and Group Finance Director
% Weighting
Adjusted earnings
per share 25%
Normalised free
cash flow 25%
Customer service 25%
Personal contribution 15%
Environmental social
& governance 10%
CEO, BT Retail
% Weighting
Adjusted earnings
per share 20%
Normalised free
cash flow 20%
Customer service 20%
Personal contribution 30%
Environmental social
& governance 10%
The two financial targets for the annual bonus are two of our key
performance indicators and have a direct impact on shareholder value,
while customer service and broader objectives are vital to the company’s
long-term health and growth. The 2012/13 group financial and
customer service targets and achievement against these targets is set
out in the table below. The committee is satisfied that the measures are
appropriate and that the targets were stretching, as confirmed by the
table below.
Adjusted EPS
Measure Outcome Threshold On target Maximum
Normalised free cash flow
2012/13 Bonus Targets and Achievements
Customer service improvement
26.6p
£2,300m
4%
39.8%
73.6%
10.7%
In calculating adjusted EPS specific items are excluded as set out on
page22.
The measure for free cash flow within the annual bonus is normalised
free cash flow. The use of normalised free cash flow more closely aligns
remuneration metrics with results delivered by the group’s underlying
trading activities and key measures of performance in our reported
results. The definition of normalised free cash flow is set-out on page22.
Customer service is measured by rigorous and challenging ‘Right First
Time’ and customer issue reduction metrics across each line of business.
Customer service is measured on a quarterly basis. Payment for the
2012/13 bonus reflected good performance in the first quarter followed
thereafter by issues largely related to weather.
The ESG measure is aligned to our strategy and is assessed by the Chief
Executive for each senior executive, and by the Chairman for the Chief
Executive. Assessment is based upon BT’s regular employee survey as
well as health and safety and sustainability measures.
Performance against personal contribution and ESG measures is
assessed individually.
Ian Livingston’s cash bonus represented 129% of his current salary
(2011/12: 145%), Tony Chanmugam’s cash bonus represented 102%
of his current salary (2011/12: 113%) and Gavin Patterson’s cash bonus
represented 96% of his current salary (2011/12: 108%).
The cash and deferred elements of the annual bonus are set out in the
table on page 77. Details of the deferred share element of the bonus
relating to 2011/12, granted in June 2012, are set out on page 89.
Incentive Share Plan
ISP Vesting in 2012/13
The long-term share element of executive remuneration is the Incentive
Share Plan (ISP). Details of the ISP arrangements in 2012/13 are set out
below. A description of the ISP awards that have not yet vested is set out
on page 90.