BT 2002 Annual Report Download - page 58

Report on directors' remuneration
The Remuneration Committee is made up wholly of
independent non-executive directors. Throughout the year,
the company has applied the principles in Section 1 of the
Combined Code on Corporate Governance (the Code) and
complied with the Code.
The Committee's role is to set the remuneration policy
for the Chairman, the executive directors, the members of
the company's Operating Committee (OC) and senior
executives reporting to the Chief Executive. Speci®cally, the
Remuneration Committee agrees their service contracts,
salaries, other bene®ts, including bonuses and participation
in the company's long-term incentive plans, and other terms
and conditions of employment.
It also agrees terms for their cessation of employment
and their appointments as non-executive directors of non-
BT Group companies and other organisations. It also
approves changes in the company's long-term incentive
plans, recommends to the Board those plans which require
shareholder approval and oversees their operation.
Sir Anthony Greener has chaired the Committee since
18 July 2001 in succession to Lord Marshall who retired at
the end of the 2001 AGM. Other members of the
Remuneration Committee during the year were:
&Dr lain Anderson (retired 30 September 2001)
&Maarten van den Bergh
&Lou Hughes (appointed 25 June 2001)
&Neville Isdell (retired 14 January 2002)
&June de Moller (retired 14 January 2002)
&Carl Symon (appointed 1 February 2002)
The Committee met seven times during the 2002 ®nancial
year. The Chairman and Chief Executive are invited to
attend meetings when appropriate. They are not present
when matters affecting their own remuneration
arrangements are considered.
Although the Board remains ultimately responsible for
both the framework and the cost of executive remuneration,
it has delegated prime responsibility for executive
remuneration to the Remuneration Committee. Non-
executive directors who are not members of the Committee
are entitled to receive papers and minutes of the
Committee.
The Committee has access to professional advisers,
both within the company and externally.
Remuneration Policy
BT's stated executive remuneration policy is in line with the
company's overall practice on pay and bene®ts. This is to
reward employees competitively, taking into account
individual performance, company performance, market
comparisons and the competitive pressures in the
worldwide information technology and communications
industry. Our external comparisons look at comparable
roles in similar organisations in terms of size, market sector
and business complexity in the UK and overseas. The
strategy for executive pay, in general terms, is for basic
salaries to re¯ect the relevant market median, with total
direct compensation (basic salary, annual bonus and the
value of any long-term incentives) to be at the upper quartile
for sustained and excellent performance.
The Remuneration Committee considers that it is
important to link a signi®cant proportion of the total
executive remuneration package to individual, line of
business and corporate performance. Remuneration
arrangements and performance targets are reviewed
annually to achieve this.
Where any signi®cant changes are proposed, these will
be discussed with BT's principal shareholders and the main
representative groups of the institutional shareholders.
Packages
The remuneration package for the executive directors,
members of the OC and senior executives reporting to the
Chief Executive comprises:
Basic salary
Salaries are reviewed annually (although not necessarily
increased). Salary increases are made where the Committee
believes that adjustments are appropriate to re¯ect
performance, contribution, increased responsibilities and/or
market pressures.
Performance-related remuneration
Annual bonus
The annual bonus plan focuses on annual objectives, and is
designed to reward the achievement of results against these
set objectives. Performance is measured on a scorecard
basis. Targets are set at the beginning of the ®nancial year,
and performance is reviewed throughout the year. Targets
for the 2002 ®nancial year were based on key corporate
objectives such as pro®tability, cash ¯ow, the debt
reduction programme, the group restructuring and
customer satisfaction, as well as line of business and
personal objectives. Speci®c weights were attached to each
objective. The Committee has the ¯exibility to adjust bonus
awards in exceptional circumstances.
Deferred Bonus
Awards in the form of BT shares are granted under the
Deferred Bonus Plan (DBP) to executive directors and
senior executives, linked to the value of their annual bonus.
Awards made during the 2002 ®nancial year in respect of
performance in the 2001 ®nancial year were equivalent in
value to 50% to 100% of the executive's gross annual
bonus.
The shares are held in trust and transferred to the
executive if still employed by the company in three years'
time. There are no additional performance measures for the
vesting of DBP awards. The ®rst awards granted under the
DBP in 1998 vested in August 2001.
Current long-term incentives
The BT Equity Incentive Portfolio (the Portfolio) is designed
to ensure that equity participation is a signi®cant part of
overall remuneration.
BT Group Annual Report and Form 20-F 2002 57