BT 2014 Annual Report Download - page 108

105
Governance
Governance
Executive Directors and Chairman
Policy Element Operation and Opportunity Performance measures or basis of payment
Base salary
Purpose – a
core element of
remuneration, used
to attract and retain
executive directors
of the calibre
required to develop
and deliver our
business strategy.
Salaries for the executive directors and the Chairman are reviewed
annually, although an out-of-cycle review may be conducted if the
committee determines it appropriate. A review may not necessarily
lead to an increase in salary. Salaries are paid monthly in cash.
The pay and conditions for all UK employees are considered when
setting salaries for executive directors and the Chairman.
Whilst there is no maximum salary level, any
increase will typically be broadly in line with BTs
UK employee population.
For the executive directors, higher increases may
be made under certain circumstances, such as
• increase in the scope and/or responsibility of
the individual’s role
• development of the individual within their
role and
• where an executive director has been
appointed to the Board at a lower than typical
level of salary, for example to reect less
experience, larger increases may be awarded
to move them closer to market practice as their
experience develops.
Individual and business performance are taken
into account in deciding salary levels.
BeneƬts
Purpose – to
support health
and wellbeing and
provide employees
with a market
competitive level of
benets.
Executive directors and the Chairman receive benets which typically
include (but are not limited to) company car (or monthly allowance
in lieu of a car or part of such allowance not used for a car), fuel and/
or driver, personal telecommunication facilities and home security,
medical and dental cover for the directors and their immediate family,
special life cover, professional subscriptions, personal tax advice and
nancial counselling up to a maximum of £5,000 (excluding VAT) a
year.
Where executive directors are required to relocate, the committee
may oer additional expatriate benets, if considered appropriate.
The company purchases directors’ and ocers’ liability insurance
to cover the directors, and has in place a directors’ and ocers’
indemnity. The insurance operates to protect the directors in
circumstances where, by law, BT cannot provide the indemnity.
Further details of the directors’ and ocers’ liability insurance
and indemnity are set out on page 112.
While no maximum level of benets is prescribed,
they are generally set at an appropriate market
competitive level determined by the committee,
taking into account a number of factors
including
• the jurisdiction in which the employee is based
• the level of benets provided for other
employees within the group and
• market practice for comparable roles
within appropriate pay comparators in that
jurisdiction.
The committee keeps the benet policy and
benet levels under regular review.
Annual bonus
Purpose – to
incentivise and
reward delivery of
our business plan on
an annual basis.
Executive directors are eligible for an annual bonus. The Chairman is
not eligible for an annual bonus. Awards are based on performance in
the relevant nancial year. The annual bonus is paid in two elements,
a cash element, and a deferred element awarded in shares. Annual
bonus amounts are not pensionable.
The committee sets annual bonus performance targets each year,
taking into account key strategic priorities and the approved budget
for the year.
The committee ensures that targets set are appropriately stretching
in the context of the corporate plan and that there is an appropriate
balance between incentivising executive directors to meet targets,
while ensuring that that they do not drive unacceptable levels of risk
or drive inappropriate behaviours.
At least one-third of the annual bonus will be granted in the form of
deferred shares to strengthen further the alignment of management
interests with the long-term interests of shareholders. The deferred
element in shares must be held for a deferral period which will not
be less than three years. Additional shares may be accrued in lieu of
dividends and awarded on any shares which vest. If following the grant
of an award, facts subsequently become known to the committee which
would justify a reduction in the award, the committee may reduce the
number of deferred shares, including to nil. Further information on the
malus provisions are set out on page 109.
The maximum annual bonus opportunity is 240% of base salary.
The committee seeks to eectively reward
performance against the key elements of our
strategy. Measures used typically include, but are
not limitedto
• nancial performance measures – these are
chosen carefully to ensure alignment between
reward and underlying nancial performance.
As an example, such measures may include free
cash ow and earnings pershareand
• non-nancial performance measures – these
reect key company, strategic and individual
goals. For example, such measures may include
customer service, purposeful company and
personal objectives.
In terms of weighting, non-nancial measures
will typically account for no more than 50% of
the total annual bonus.
A sliding scale between 0% and 100% of
the maximum award applies for achievement
between threshold and maximum performance
under the bonusplan.