BT 2014 Annual Report Download - page 109

106 Governance
Incentive Share
Plan (ISP)
Purpose – to
incentivise executive
directors over the
longer-term, by
rewarding delivery
of stretching
targets linked to our
strategy and long-
term value creation.
Executive directors are eligible to participate in the ISP.
The Chairman is not eligible to participate. The ISP
forms the long-term variable element of executive
remuneration. Awards are discretionary and normally vest
subject to performance measured over a
three-year period.
Under the terms of the plan rules the current ISP has no
maximum award level. The committee have determined
that it will impose limits for executive directors to apply
to future awards. The maximum normal ISP award that
may be awarded to an executive director in respect of any
nancial year of the company will be 400% of basic salary.
In exceptional circumstances, for example recruitment,
this limit may be increased to 500% of basic salary.
The proposed award levels for 2014/15 are set out on
page 101.
Where shares vest, additional shares representing the value
of reinvested dividends are added. In respect of ISP awards
made to executive directors in June 2014 and future
years, there will be a further holding period of two years,
commencing from the end of the three-year performance
period applicable to the net number of
shares received after tax and other statutory deductions.
During the holding period, no further performance
measures will apply as performance will already have
been assessed.
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 shares, including to nil. Further information
on the malus provisions are set out on page 109.
The committee aligns the performance measures under
the ISP with the long-term strategy of the company and
considers that strong performance under the chosen
measures should result in sustainable value creation
• nancial measures – to reect the nancial performance
of our business and a direct and focused measure of
company success and for example may include free
cash ow and revenue measures. We set targets to be
appropriately stretching, with regard to a number of
internal and external reference points including our
business plan and consensus market expectations and
• share price performance measures, to reect the ultimate
delivery of shareholder returns which may,
for example, include TSR. This promotes alignment
between executive director reward and shareholder value
creation. Targets are set with reference to wider market
practice and positioned at a level which we consider
represents stretching performance. Targets will be
measured against a comparator group containing other
telecommunication companies and/or companies which
are either similar in sie or market capitalisation and/or
have a similar business mix and spread as BT or operate in
comparable markets.
In terms of weighting, share price performance measures will
typically account for no more than 50% of the total award.
Under each performance measure, performance below
threshold levels would result in nil vesting for that element.
For threshold levels of performance, no more than 25%
of the maximum for that element would typically vest,
rising to 100% for maximum performance.
If an event or transaction occurs which causes the committee
to conclude a target is no longer appropriate, the committee
can amend that target in a manner which is reasonable in the
circumstances provided that the new target produces a fairer
measure of performance and is not materially less dicult
to satisfy.
Pension
Purpose – to attract
and retain executive
directors of the right
calibre by providing
market competitive
post-retirement
income.
Executive directors currently receive a cash allowance in
lieu of pension.
The committee may determine that alternative pension
provisions will operate for new appointments to the
Board. When determining pension arrangements for new
appointments, the committee will give regard to
• the cost of the arrangements
• pension arrangements received elsewhere in the group
and
• relevant market practice.
The Chairman does not receive a pension benet or
payment in lieu of such benet, but does receive a lump
sum death in service benet of £1m.
For executive directors, the maximum cash allowance
(or equivalent contribution to an executive director’s
pension) may not exceed 30% of salary.
Executive directors who are not members of the BTPension
Scheme benet from a death in service cover of a lump
sum of 4x salary and a dependant’s pension of 30% of
capped salary.
Save As You Earn
Scheme
(saveshare)
Purpose – to
encourage employee
share ownership.
Executive directors and the Chairman may participate
in the saveshare (HMRC approved savings related share
option plan) on the same basis as other eligible employees.
All participants may invest up to the limits operated by the
company at the time. There are no performance measures
attached to these awards.
ESIP
(directshare)
Purpose – to
encourage employee
share ownership.
Executive directors and the Chairman may participate in
the Directshare (HMRC approved purchase of shares from
gross salary) on the same basis as other eligible employees.
All participants may invest up to the limits operated by the
company at the time. There are no performance measures
attached to these awards.
Notes to the policy table
1. For further information on the performance measures applicable to the annual bonus and ISP see
page 101.
2. No performance measures are applicable to salary, beneƬts, pension, BT saveshare and BT
directshare in line with market practice.