BT 1999 Annual Report Download - page 50

49
REPORT ON DIRECTORS’ REMUNERATION
Service agreements
It is the company’s policy that the Chairman and the
executive directors have service agreements providing
for one year’s notice, except where it is necessary to
offer longer periods to new directors from outside BT
or circumstances make it appropriate to offer a longer
fixed term. All the service agreements contain
provisions dealing with the removal of a director
through poor performance. They also deal with
payments to which the director would be entitled in the
event of early termination of the contract by BT.
Outside appointments
The Committee believes there are significant benefits
to both the company and the individual from executive
directors accepting non-executive directorships of
companies outside BT. The Committee will consider
approving up to two external appointments for which
the director may retain the fees.
Non-executive directors’ contracts of appointment
It is the company’s policy that every non-executive director
has a contract of appointment. This covers, amongst other
things, the initial term for which they are appointed, a
general statement of their role and duties, the fees they will
receive as a director and supplementary fees for additional
work such as being a member of a Board Committee.
Non-executive directors are normally appointed for
an initial period of three years and are then subject to
12 months’ notice. Further details of their appointment
arrangements are set out on page 44 in the section of this
report dealing with corporate governance issues.
Non-executive directors’ remuneration
About two-thirds of the BT Board are non-executive
directors who, in accordance with BT’s articles of
association and as recommended by the Code, cannot
individually vote on their own remuneration. Therefore, the
Board does not consider it appropriate for the whole Board
to determine non-executive remuneration. This is set by the
Chairman and the Chief Executive after considering
external advice on appropriate levels of remuneration.
The basic fee for non-executive directors, which includes
membership of one committee, was increased from
1 January 1999 to £30,000 per year (previously £25,000).
Additional fees for membership of Board committees range
from £3,000 to £5,000 per year. Committee chairmen
receive an additional fee of £2,000 a year for each
committee they chair. The Deputy Chairman is paid an
inclusive annual fee of £75,000 (1998: £65,000).
To align further the interests of the non-executive directors
with those of shareholders, in January 1999 the company
introduced a policy to encourage these directors to
purchase £5,000 of BT shares each year. The directors are
expected to hold those shares until they retire from the
Board. All the non-executive directors have confirmed
that they support this policy and will buy shares.
Remuneration review
Directors’ remuneration
As reported elsewhere in the annual report, Sir Iain
Vallance became part-time Chairman from 1 August 1998.
From that date, his annual salary has been £275,000 (from
£500,000 as full-time Chairman). From 1 April 1998, fifteen
months after their previous 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 from 1 July 1998 has been £465,000 (from £450,000).
From 1 March 1998, Bill Cockburn’s salary was, at his
request, reduced by £10,000 a month. From that date,
the company made contributions of £10,000 each month
to an unapproved retirement benefits scheme transferred
from Bill Cockburn’s previous employer. This voluntary
salary reduction ceased on 30 September 1998. Bill
Cockburn’s bonus and other relevant benefits were
determined on his full salary during the period of his
voluntary salary reduction.
From 1 April 1999, Sir Peter Bonfield’s salary was
increased to £725,000 a year and Robert Brace’s to
£355,000. Bill Cockburn’s salary will be increased to
£495,000 from 1 June 1999.
For Sir Peter Bonfield, annual bonus awards are based
wholly on the achievement of group-wide objectives and
results measured against the overall BT Corporate
Scorecard. His “on target” bonus for the 1999 financial year
was 65% of salary, subject to a maximum of 100% of salary.
In addition, Sir Peter was paid a bonus in January 1999
of £150,000 in recognition of his contribution to the sale
of BT’s stake in MCI to WorldCom for US$7 billion and
to the agreement with AT&T for the formation of the
global venture.
For Robert Brace, Bill Cockburn and other members of the
Group Executive Committee, annual bonus awards are based
on the achievement of a mix of group, divisional and
personal objectives. Robert Brace’s bonus this year also
took account of his contribution to the sale of BT’s MCI
stake and the formation of the global venture.
Robert Brace’s “on target” bonus for the 1999 financial year
was between 35% and 40% of salary, subject to a maximum
of 60%.