BT 1998 Annual Report Download - page 33

As recommended by the Greenbury and Hampel reports,
the Remuneration Committee is made up wholly of
independent non-executive directors. It also complies
with Section A of the best practice provisions of the
Stock Exchange Listing Rules as they relate to
executive directors.
The Committee’s role is to agree the service contracts,
salaries, other benefits, including bonuses and participation
in the company’s share plans, and other terms and
conditions of employment of the executive directors and
members of the company’s Group Executive Committee.
It has been chaired since 1 January 1996 by Sir Colin
Marshall and its other members during the year were:
Dr Iain Anderson
Sir Ewen Fergusson
Keith Oates
The Committee met seven times during the year ended
31 March 1998. The Chairman and Chief Executive will
normally attend meetings to discuss senior executive
remuneration recommendations, except their own.
The Committee confirms that full consideration has been
given to Section B of the Stock Exchange best practice
provisions in framing its remuneration policy. Although the
full Board considers itself ultimately responsible for both
the framework and the cost of executive remuneration, the
Board has delegated prime responsibility for these issues,
together with control of executive remuneration packages,
to the Remuneration Committee.
Remuneration policy
BT’s executive remuneration policy is in line with the
company’s overall practice on pay and benefits, that is to
reward employees competitively taking into account
performance, market value and competitive pressures in
the communications and IT sectors. The Committee does
not seek to maintain any strict market position but rather
to ensure that pay is set appropriately taking into account
pay levels for comparable roles in a range of appropriate
‘blue chip’ companies both within and outside the
telecommunications/hi-tech sectors. When making
comparisons, the Committee benchmarks not only with
companies in the telecommunications and IT sectors but
also the largest companies by market capitalisation, such as
the FT-SE 100 and, in particular, those organisations where
the complexity of roles and of the business and the extent
of international scope are similar. The Committee also
takes account of executive pay trends in the external
market and increases in pay for other groups of employees
in the company. As BT continues to compete in a global
market for executives at this level, the Committee also
looks at the global, and particularly, US markets.
Packages
The remuneration package for executive directors
comprises:
•Basic salary
Salaries are reviewed (although not necessarily
increased) annually. Salaries are increased only where
the Committee believes that market adjustments are
appropriate to reflect performance, increased
responsibilities and/or market pressures. Salary
adjustments were made during the year for a number of
key executives, including Sir Peter Bonfield and Robert
Brace. From 1 April 1998, fifteen months after their last
increase, Sir Peter Bonfield’s salary was increased from
£570,000 to £617,500 and Robert Brace’s salary
increased from £300,000 to £330,000. Bill Cockburn was
appointed to the Board on 1 April 1998. His salary is
£450,000. However, for the 12 months from 1 March
1998 it has, at his request, been reduced by £120,000
to £330,000. The company will during that period
make contributions of £120,000 to an unapproved
retirement benefits scheme transfer red from
Bill Cockburn’s previous employer. His bonus and
other relevant benefits will continue to be determined
on his base salar y. Bill Cockburn received a payment
of £120,150 in consideration of the loss of potential
benefits from his previous employer.
•Annual bonus
The annual bonus plan is designed to focus on annual
objectives and to reward senior executives appropriately
for the results achieved against these objectives.
Targets are set at the start of the financial year based
on key corporate objectives – such as revenue growth,
profitability, quality of service, customer satisfaction and
people management. Specific weights are attached to
each objective on the basis of the BT Corporate
Scorecard. For Sir Peter Bonfield, bonus awards are
based wholly, and for Sir Iain Vallance, primarily, on the
achievement of group-wide objectives and results.
Bill Cockburn’s bonus to 31 March 1998 was also
calculated on the achievement of group-wide objectives
and results. From 1 April 1998, his bonus, in common
Report on directors’ remuneration