BT 1998 Annual Report Download - page 34

with Robert Brace and the other members of the Group
Executive Committee, will be based on the achievement
of a mix of group, divisional and personal objectives.
The Committee retains the flexibility to enhance bonus
awards where exceptional circumstances make this
appropriate.
For Sir Iain Vallance and Sir Peter Bonfield, for 1997/98,
the ‘on target’ bonus was 50% of salary subject to a
maximum of 100% of salar y. As explained in the
Chairman’s statement, Sir Iain takes up a part-time role
later in the year. From that time he will not participate
in any annual bonus plan.
Robert Brace’s ‘on target’ bonus for the year was 32.5%,
subject exceptionally to a maximum of 100% of salary
for this year only. Bill Cockburn’s bonus arrangements
provide for an ‘on target’ bonus of 50% of salary subject
to a maximum of 75%.
Bonus awards for executive directors for the year under
review ranged from 41% to 65% of salary.
•Long-term remuneration
BT Long Term Remuneration Plan/
BT Performance Share Plan
The BT Long Term Remuneration Plan (‘LTRP’) was
approved by shareholders at the 1995 AGM. It was
designed to ensure that BT’s remuneration package
remains competitive, to encourage personal investment
in BT shares, to foster community of interest with
shareholders, to encourage key executives to stay
with BT and to link reward and long-term corporate
performance more effectively. Under the plan, shares
are awarded to participants conditionally on the
company meeting a pre-determined corporate
performance measure and, normally, the participants
still being employed by the BT Group at the end of
a five-year period. The performance measure is
BT’s total shareholder return (‘TSR’) relative to the
FT-SE 100. The initial value of the awards granted
under the LTRP in 1997 as a percentage of salary
ranged from 25% to 100%. Sir Iain Vallance has not
participated in the LTRP.
As Bill Cockburn joined the company too late in the
year to participate in the 1997 operation of the LTRP,
he has been granted an award of shares under the
BT Performance Share Plan (‘PSP’) to the value
of £150,000 at the date of the award.
Under the PSP, approved by shareholders at the 1995
AGM, shares are conditionally awarded to participants
on the basis that they will only be entitled to these
shares in full at the end of a three-year period (which
may be extended up to five years) if the company has
met a pre-determined corporate performance measure
and the participants are still employed by the BT
Group. The performance measure is the same as for
the LTRP. The first potential vesting of awards under
the PSP will be in 1998/99.
The future
The Remuneration Committee keeps under review
remuneration arrangements to ensure that they provide
an incentive to executives and align performance and
reward with the interests of shareholders.
The Committee’s policy is over time to increase
the proportion of executives’ overall remuneration
packages which is performance-linked variable pay.
In furtherance of this policy, and to ensure BT’s
packages remain competitive, a Defer red Bonus
Plan has been introduced. The defer red bonus will
equal one-half of the gross annual bonus. It will be
compulsorily deferred and applied to acquire BT
shares, which will be held in trust for three years.
Executives must continue to be employed for the
whole of the holding period for the shares to be
then transferred. Therefore, in addition to bonuses
continuing to be based fully on performance, the value
of the defer red bonus will now be aligned with the
future fortunes of shareholders. Existing shares will
be used for the defer red bonuses and the first deferred
award will occur this year.
To increase the linkage with longer-term performance,
the LTRP has been modified, and will now be called the
Executive Share Plan. In previous years, part of the
award was performance-linked only on grant and not
also on vesting. This year and in the future all the
awards will be subject to performance criteria over
afive-year period, which will continue to be TSR. The
level of the awards granted will continue to be based on
the individual performance of the executives during the
preceding year thereby ensuring that both the grant
and vesting of awards will be performance-linked.
Awards will be between 20%and 100% of salary and
R E P O R T O N D I R E C T O R S ’ R E M U N E R AT I O N