BT 2000 Annual Report Download - page 50

Annual report and Form 20-F 49
The ¢rst vesting of awards under the ESP was in the
2000 ¢nancial year. On the basis that the company's TSR
was at 15th position compared with the other FT-SE 100
companies at the end of the ¢ve-year performance period,
100% of the shares under award vested in 25 participants
on 2 August 1999.
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 other companies in the FT-SE 100.
Normally, if the performance target is met and the
participant is still employed by the group, the awards will
vest within two years after the end of a three-year cycle
(which may be extended up to ¢ve years).
The value of awards granted under the PSP in the
2000 ¢nancial year was generally in the range of 10% to
25% of salary. Around 1,800 key managers, who do
not participate in the ESP, have received awards
under the PSP.
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 established
in 1998.
Awards, in the form of BT shares, were granted to
around 300 senior executives during the 2000 ¢nancial year
in respect of the 1999 ¢nancial year. The awards were
generally equivalent in value to one-half of the executive's
gross annual bonus (excluding any special bonuses) and
the shares are held in trust and transferred to the executive
if still employed by the company in three years time. It is
intended that the value of deferred bonuses granted in
respect of the 2000 ¢nancial year will, except in a very
limited number of exceptional circumstances where higher
levels of award are justi¢ed, be of a similar value. It is
anticipated that around 300 senior executives will receive
deferred bonuses.
The ESP, PSP and DBP use existing shares only.
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 outstanding options at the end of the 2000
¢nancial year are shown on page 53.
Pensions
For the executive directors and most other senior
executives, the policy is to provide pension bene¢ts of one-
thirtieth of ¢nal 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 bene¢ts of two-thirds of ¢nal
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
bene¢ts and long-term incentives are excluded.
The primary means of providing pensions is through
the BT Pension Scheme (BTPS).
Other bene®ts
Other bene¢ts include car and driver, personal
telecommunications facilities, medical and dental cover for
the director and immediate family and ¢nancial counselling.
The company has a permanent health insurance policy to
provide cover for the Chairman and full-time executive
directors and members of the Group Executive Committee,
who may become permanently incapacitated.
Other incentive plans
An incentive plan has been established for senior executives
in BT Cellnet, the mobile phone operator which is wholly
owned by BT. This plan speci¢cally 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 as a whole. 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 reviewed this plan and
will review any long-term plans to be established within
the group, to ensure they are consistent with BT's overall
remuneration policy for its senior executives.
New long-term incentive plans
As BT continues to expand its operations outside the UK,
it needs to compete for key people in the global market. In
a ¢ercely competitive business environment, where the
internet, multimedia, mobile and solutions areas are
expanding, remuneration packages are signi¢cantly
in£uenced by US practice. The ESP and PSP no longer
provide the £exibility needed to deliver the rewards
required to recruit and retain the people with the skills to
meet the needs of the business. Shareholders will therefore