BT 1999 Annual Report Download - page 49

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REPORT ON DIRECTORS’ REMUNERATION
or her individual performance. The initial value of the
awards is between 33% and 100% of salary. The first
potential vesting of awards under the ESP will be in the
2000 financial year. Around 120 senior executives
participate in the ESP.
The BT Performance Share Plan (PSP) was also approved
by shareholders in 1995. Like the ESP, the vesting of
awards of BT shares under the PSP is subject to the
company meeting a pre-determined TSR target
measured against the FT-SE 100 companies. Normally,
if the performance target is met and the participant is
still employed by the group, the awards will vest within
two years of the end of a three-year cycle (which may
be extended up to five years).
The value of awards granted under the PSP has
generally been around 10% to 20% of salary each year.
For the awards to be granted in the 2000 financial year
it is intended that the minimum value of the awards will
remain at 10% of salary but the maximum value of the
awards will be increased to 25% of salary to ensure that
the awards are competitive. Around 1,200 senior
managers, who do not participate in the ESP, will
receive awards under the PSP. The first vesting under
the PSP was in 1998 when 90% of the shares vested,
based on BT’s TSR measured against the FT-SE 100
companies, ranking in 34th position.
In the event of the company purchasing its own shares,
the Remuneration Committee will review performance
targets under the ESP and the PSP and adjust them if it
considers such an adjustment would be appropriate.
BT Deferred Bonus Plan
The BT Deferred Bonus Plan (DBP) was introduced
in 1998.
The first awards, in the form of BT shares, were granted
to around 200 senior executives during the 1999
financial year in respect of the 1998 financial year.
The awards were equivalent in value to one-half of the
executive’s gross annual bonus (excluding any special
bonuses) and the shares are held in trust. The shares
will normally be transferred to the executive if he or she
has continued to be employed by the group throughout
a three-year deferred period. It is intended that the
value of deferred bonuses granted in respect of the 1999
financial year will, except in a very limited number of
exceptional circumstances where higher levels of award
are justified, be equivalent to 50% of annual bonus. It is
anticipated that around 300 senior executives will receive
deferred bonuses in respect of the 1999 financial year.
BT Share Option Scheme
The BT Share Option Scheme for senior executives
was not replaced after its expiry in January 1995.
The last options were granted in December 1994.
Details of options exercised during the 1999 financial
year and unexercised options are shown on page 53.
•Pensions
For the executive directors and other senior executives,
the policy is to provide pension benefits of one thirtieth
of final salary for each year of service with a two-thirds
pension for the surviving spouse. The executive
directors and certain other senior executives have
undertakings of pension benefits of two-thirds of final
salary at normal retirement age with a pension of
two-thirds of the director’s pension for the surviving
spouse. On death in service a lump sum equal to four
times annual salary is payable together with a pension
of two-thirds of the director’s prospective pension for
the surviving spouse. Pensions are based on salary
alone – bonuses, other benefits and long-term
incentives are excluded.
The primary means of providing pensions is through
the BT Pension Scheme (BTPS).
•Other benefits
Other benefits include car and driver, personal
telecommunications facilities, medical and dental
cover for the director and immediate family and
financial counselling. During the year, the company
introduced a permanent health insurance policy to
provide cover for full-time executive directors and
members of the Group Executive Committee.
•Other incentive plans
During the year, an incentive plan was established
for senior executives in BT Cellnet, the mobile
phone operator owned 60% by BT. This plan
specifically links an element of these executives’
long-term remuneration to the performance of
BT Cellnet over a three and a half year period,
rather than to the performance of the BT group.
All the awards are cash awards. It replaces
participation in the DBP for the executives
concerned for so long as it operates.
The Remuneration Committee has reviewed this
plan and will review any further plans of this type,
to ensure they are consistent with BT’s overall
remuneration policy for its senior executives.