BT 2014 Annual Report Download - page 97

94 Governance
Services consolidated the position as a global leader for managed
networked IT services, with an order intake of £6.9bn. The Chairman
assessed the quality and delivery of our TV service and proposition.
In respect of assessment of the ESG element, BT achieved top quartile
improvement in organisational health, with employee engagement,
senior management perception, and other key indicators at their highest
ever level across the company.
The Group Finance Director achieved 85% of the maximum opportunity
on his personal objective outcome and 75% of the maximum
opportunity on the ESG measure. On the personal element, the Group
Finance Director delivered strong nancial performance, maintained
focus on the BT Global Services business, managed our location and
property strategy and disposed of the interest of Tech Mahindra.
For the ESG element, he has mentored a number of people within
thegroup, exhibited strong values and commitment in the ESG
area, andduring the year he joined the CSRB reecting his personal
commitment to sustainable and responsible business.
The trend in underlying revenue excluding transit was up 0.5%
compared with the decline of 3.1% in the prior year. Further information
on underlying revenue can be found on page 60. The revenue growth
measure outcome was 95% of the maximum opportunity.
For both the Chief Executive and Group Finance Director, bonus is
delivered in both cash and a deferred element awarded in shares.
Oncegranted, deferred shares are not subject to any further
performance conditions, and will normally be transferred to participants
at the end of the three-year deferred period if the participant is still
employed by the BT group.
Gavin Patterson’s annual bonus, paid both in cash and in the award of
deferred shares represented 168.6% of the pro-rata salary used to
calculate his bonus (2012/13 167%) and 68.1% of the maximum
bonus opportunity (2012/13 64%). 62.8% of the annual bonus was
paid in cash and 37.2% will be granted in deferred shares in June 2014.
Tony Chanmugam’s annual bonus, paid both in cash and in the award of
deferred shares represented 209.1% of his pro-rata salary (2012/13
178%) and 79.7% of the maximum opportunity (2012/13 68%).
57.1% of the annual bonus was paid in cash and 42.9% will be granted
in deferred shares in June 2014.
Bonus award and proportion of value
Element of bonus
Gavin
Patterson
Tony
Chanmugam
Adjusted EPS 23.74% 24.42%
Normalised free cash ow 19.69% 20.25%
Revenue growth 14.63% 13.60%
Customer service 0% 7.20%
ESG 20.19% 16.18%
Personal contribution 21.75% 18.35%
Ian Livingston received a pro-rated cash bonus reecting his service during
the year. Further details of payments to Ian are set out on page96.
Incentive share plan
The ISP 2011 is due to vest in May 2014. The performance conditions
are based 40% on relative TSR, 40% on adjusted free cash ow,
and20% on growth in underlying revenue (excluding transit) over a
three-year performance period.
TSR
The TSR element is measured against a comparator group containing other
telecommunications companies and companies which are of a similar sie
or market capitalisation and/or have a similar business mix and spread as
BT or operate in comparable markets.
The weighting of the annual bonus structure is set out below.
Chief Executive and Group Finance Director
% Weighting
20%
Adjusted earnings
per share
20%
Normalised free
cash ow
20%
Customer service
10%
Revenue growth
15%
Personal contribution
15%
Environmental,
social & governance
CEO, BT Retail
% Weighting
15%
Adjusted earnings
per share
15%
Customer service
15%
Normalised free cash ow
10%
Revenue growth
30%
Personal contribution
15%
Environmental,
social & governance
The table below provides an overview of performance against the targets
for the 2013/14 annual bonus.
Measure Threshold Target Maximum Outcome
Result %
of max
Adjusted EPS (p)a25.5 26.8 28.8 28.2 85%
Normalised free cash
ow £mb2,258 2,378 2,556 2,450 70%
a Adjusted EPS is deƬned on page 61.
b Normalised free cash Ʈow is deƬned on page 61.
Strong progress was made during the year. Adjusted EPS increased 7%
to 28.2p, and normalised free cash ow was £150m above 2012/13.
We set high aspirations for our customer service performance and during
the year made positive early progress towards those goals. However,
due to a series of circumstances, and in particular, the unprecedented
ooding across the country and the pressure on our contact centres
following the launch of BT Sport, we did not make the progress that
we aspired to. As a consequence, the Chief Executive proposed to the
committee that he forgo any bonus in relation to customer service
performance. The committee welcomed this proposal and, accordingly,
no bonus was paid to the Chief Executive in respect of customer service
performance. Further information on customer service is set out on
page61.
The Chairman assessed the Chief Executive, and the Chief Executive
assessed the Group Finance Director on ESG and personal contribution
targets. Assessment is based on a number of factors including BT’s regular
employee surveys, organisational health, culture and performance against
personal objectives. The Chief Executive achieved 60% of the maximum
opportunity on his personal objective element and 75% of the maximum
opportunity on the ESG measure. On the personal element, BTConsumer
grew revenue 4% in 2013/14, the most in over ten years. BT Global