BT 2014 Annual Report Download - page 105

102 Governance
Annual bonus
The committee reviewed the bonus opportunity for the Group Finance
Director in light of the changes for the Chief Executive. For 2014/15,
the bonus structure for the Group Finance Director was adjusted
to bring his remuneration framework into line with the Chief Executive.
The level of bonus opportunity for the Chief Executive and Group Finance
Director is set out in the table below.
Level of 2014/15 bonus
Chief Executive Group Finance Director
Annual cash bonus Target 80% of salary Target 70% of salary
Maximum 160% of salary Maximum 140% of salary
Deferred bonus in shares Target 40% of salary Target 35% of salary
Maximum 80% of salary Maximum 70% of salary
Total bonus Target 120% of salary Target 105% of salary
Maximum 240% of salary Maximum 210% of salary
The 2014/15 annual bonus structure and weighting is set out below.
Chief Executive and Group Finance Director
% Weighting
20%
Adjusted earnings per share
20%
Normalised free cash ow
25%
Customer service
10%
Revenue growth
15%
Personal contribution
10%
Purposeful company
The three nancial targets for the annual bonus adjusted earnings per
share normalised free cash ow and revenue growth have a direct
impact on shareholder value. Customer service (measured through our
Right First Time (RFT) and customer advocacy metric) is vital to the
company’s long-term health and growth. All four of these measures
areKPIs for BT and are dened on pages 60 and 61.
Revenue growth was introduced to the short-term bonus structure
for the rst time in 2013/14 to reect our aim to drive sustainable
protable revenue growth and increase alignment between the annual
bonus and long-term elements of remuneration.
We do not publish details of the adjusted EPS, normalised free cash
ow and revenue growth bonus thresholds in advance since these are
commercially condential. We will publish achievement against these
targets at the same time as we disclose bonus payments in the Annual
Report 2015 so that shareholders can evaluate performance against
those targets.
The purposeful company measure is aligned to our strategy and is
assessed by the Chief Executive for the Group Finance Director and
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 and replaces the previous
ESG measure.
Performance against personal contribution and purposeful company
measures is assessed individually.
Incentive Share Plan
As noted on page 91 the remuneration structure for both the Chief
Executive and Group Finance Director has been rebalanced, with a
reduction in annual bonus opportunity, and a shift of emphasis to the
long-term. Accordingly the ISP 2014 award for the Chief Executive will
be 400% of salary and 280% of salary for the Group Finance Director.
The awards are expected to be made in June 2014. The number of
shares awarded is calculated using the average middle market price of a
BT share for the three days prior to the grant. The ISP 2014 awards will
be subject to a holding period of two years, commencing from the end
of the three-year performance period. The holding period will apply to
the number of shares received on vesting after tax and other statutory
deductions. No further performance measures will apply during the
holding period as performance will have already been assessed.
The performance conditions will be the same as for the ISP 2013, 40%
based on relative TSR, 40% on normalised free cash ow, and 20%
growth in underlying revenue excluding transit revenue over a three-
year performance period.
The TSR comparator group is the same as for the ISP 2013 except
for the removal of Virgin Media who were acquired by Liberty Global.
Cable&Wireless Worldwide was removed from the TSR comparator
group in 2012/13 and these represent the only changes from the
comparator group on page 95.
TSR Vesting schedule
For the ISP awards to be made in June 2014, 40% of the potential
outcome is based on relative TSR. The following graph shows the
potential vesting of awards based on the TSR element.
2014 Awards
TSR ranking position
% of ISP 2014 vesting
0%
10%
20%
30%
40%
0 5 10 15 20 25
The target ranges for the normalised free cash ow and underlying
revenue growth excluding transit revenue are set out below
Measure
2014/15–2016/17 Threshold
Level of
vesting Maximum
Level of
vestinga
Normalised free cash
owb£8.15bn 25% £9.15bn 100%
Revenue growthc3.5% 25% 6% 100%
a 9esting level between threshold and maximum will be on a straight line basis.
b Normalised free cash Ʈow is deƬned on page 61.
c Growth in underlying revenue excluding transit is deƬned on page 60.
The committee continues to believe that the free cash ow and revenue
performance measures are challenging, and the nancial performance
necessary to achieve awards towards each target is stretching. Targets
for threshold performance are established at above consensus market
expectations at the time set.