BT 2014 Annual Report Download - page 99

96 Governance
Awards granted during the year
ISP 2013 Awards
The ISP 2013 awards were made in June 2013 as set out below and
on page 99. The awards to Gavin Patterson and Tony Chanmugam
represented 200% of their salary, and the award for Ian Livingston
represented 250% of his salary. An additional ISP award was made
toGavin Patterson in November 2013 following his appointment as
Chief Executive to ensure that his overall ISP 2013 award reected his
pro-rated salary and ISP opportunity over the full year across the two
roles. The performance conditions for this award were the same as for
the main ISP 2013 award.
Director Date of award
ISP award
(shares)
Face value
of awarda
Gavin Patterson 20 June 2013 361,904 £1,139,998
12 November 2013 375,906 £1,398,370
Tony Chanmugam 20 June 2013 339,682 £1,069,998
Ian Livingston 20 June 2013 734,126 £2,312,497
a Face value based on share price at the date of grant, being £3.15 for grants on 20 June 2013 and
£3.72 for the grant on 12 November 2013.
Ian Livingston retired as a director on 10 September 2013 and his ISP
2013 award lapsed. Further details are set out opposite.
The performance conditions were based 40% on relative TSR, 40% on
normalised free cash ow, and 20% on growth in underlying revenue
excluding transit over a three-year performance period from 1 April
2013 to 31 March 2016. The performance conditions are the same for
each director. The target range for TSR the normalised free cash ow
element for the three-year performance period 2013/14 – 2015/16
and underlying revenue growth excluding transit is set out in the
tablebelow.
TSR level of vesting
TSR ranking position
% of ISP 2013 vesting
0%
10%
20%
30%
40%
0 5 10 15 20 25
Measure 2013/14 –
2015/16 Threshold
Level of
vesting Maximum
Level of
vestinga
Normalised free
cash ow £7.4bn 25% £8.4bn 100%
Revenueb growth 1% 25% 4% 100%
a 9esting levels between threshold and maximum will be on a straight line basis.
b 8nderlying revenue excluding transit.
The committee believes that the free cash ow and revenue performance
measures are challenging, and the nancial performance necessary to
achieve awards towards the upper end of the range for each target is
stretching. Targets for threshold performance were established at above
consensus market expectations at the time set.
The TSR for a company is calculated by comparing the return index (RI)
at the beginning of the performance period with the RI at the end of
the period. The RI is the TSR value of a company measured on a daily
basis, as tracked by independent analysts, Datastream. It uses the ocial
closing prices for a company’s shares, adjusted for all capital actions and
dividends paid. The initial RI is determined by calculating the average
RI value taken daily over the three months prior to the beginning of the
performance period and the end value is determined by calculating
the average RI over the three months up to the end of the performance
period. This mitigates the eects of share price volatility. A positive
change between the initial and nal values indicates growth in TSR.
The TSR comparator group for the ISP 2013 awards was the same for
awards granted in June 2012 and June 2011 except for the removal of
Cable & Wireless Worldwide which was acquired by Vodafone.
Where ISP awards vest, additional shares representing the value of
reinvested dividends on the underlying shares are added.
Deferred shares
A proportion of the 2012/13 annual bonus was awarded in deferred
shares. The table below provides further details.
Director Date of award
DBP award
(shares)
Face value
on awarda
Gavin Patterson 20 June 2013 130,057 £409,680
Tony Chanmugam 20 June 2013 129,805 £408,886
Ian Livingston 20 June 2013 379,639 £1,195,863
a Face value based on share price at the date of the award of £3.15.
The deferred shares are not subject to further performance conditions
and normally vest in three years if the individual is still employed by the
BT Group. Details of all interests in deferred shares is set out on page 98.
Former directors
Sir Peter Boneld received, under pre-existing arrangements, a pension
of £457,181 in 2013/14 (2012/13 £443,435).
Baroness Jay retired as a non-executive director on 13 January 2008
but continues as a member of the
Committee for Sustainable and
Responsible Business,
for which she receives an annual fee of £10,000.
Payments for loss of oce
Ian Livingston stepped down as Chief Executive in September 2013
to join the Government as Minister of State for Trade and Investment.
Before taking this new role, Ian was required by the Ministerial Code
to cease all ties with BT, to “avoid any danger of an actual or perceived
conict of interest.
The committee therefore reviewed the awards granted to Ian under the
Deferred Bonus Plan (DBP) and ISP. The circumstances of Ian’s departure
were unique he was not pursuing another commercial opportunity
(theministerial post is unremunerated), he was acting in the national
interest and he was not leaving due to poor performance.
The committee reected on Ian’s ve year tenure as Chief Executive,
thetransformation of the company under his leadership, and the
investment for the future that he led.
Given this strong performance, the committee considered it appropriate
that the deferred bonus shares which he has earned over this period
should be released to him. The committee therefore agreed that the
deferred elements of Ian’s bonuses over the past three years would vest
in full upon cessation of his employment.