BT 2002 Annual Report Download - page 61

Report on directors' remuneration
The shares under award for each employee have been
adjusted so that the awards are over shares of the holding
company of the participant's employing company with an
equivalent value.
Awards of shares under the DBP and RSP are not
performance related. Vesting is normally dependent upon
remaining in employment until the end of the deferred/
retention period. Awards under these plans will continue
until their normal maturity date and then be satis®ed in the
shares of the holding company of the participant's
employing company (BT Group or mmO2, as appropriate).
The shares under award for each employee have been
adjusted accordingly.
Adjustment
The adjusted value of awards of shares and options under
the BT executive share plans was determined using the
average price of ``old BT'' shares, ie the combined prices of
BT Group and mmO2 shares over the 20 dealing days
following the demerger. The average combined price of
``old BT'' shares over that 20 day period was 353.60 pence
and the average BT Group share price was 267.91 pence.
This gave a factor for the adjustment of awards over BT
shares into BT Group shares of 1.3198. Each BT share
under award or option therefore became an award or option
over 1.3198 BT Group shares (eg an option over 1,000
shares was replaced by one for 1,319 BT Group shares).
For options, the option prices were adjusted by multiplying
those prices by a factor of 0.75767.
Executive share retention
A shareholding programme, which encourages executive
directors and OC members to build up a shareholding in the
company, was introduced during the 2001 ®nancial year.
The programme, which is not mandatory, is designed
to encourage executive directors and OC members to build
up a shareholding with a value of 100% of their salary over a
period of three years.
Pensions
For the executive directors and most other senior
executives who joined the company prior to 1 April 2001,
the policy is to provide pension bene®ts of one-thirtieth of
®nal salary for each year of service with two-thirds of the
executive's pension for the surviving spouse. Those with
longer BT service have undertakings of pension bene®ts of
two-thirds of ®nal salary payable at normal retirement age
(inclusive of the pension equivalent of any retirement cash
lump sum) plus a pension of two-thirds of the director's or
executive'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 or executive's prospective pension for the
surviving spouse. Pensions are based on salary alone and
bonuses, other bene®ts and long-term incentives are
excluded.
BT closed its ®nal salary pension arrangements to new
recruits with effect from 31 March 2001 and this has also
been re¯ected in the retirement provision granted to
executive directors and other senior executives hired since
that date.
For these executive directors and other senior
executives retirement provision is generally made on a
de®ned contribution basis where the company agrees to
pay a ®xed percentage of the executive's salary each year
towards the provision of retirement bene®ts. Typically this
might be an amount equal to 20% to 30% of salary. On
death-in-service, a lump sum equal to four times annual
salary is payable.
Other bene®ts
Other bene®ts for the Chairman and executive directors
include car and in some cases 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 executive directors and
members of the OC who may become permanently
incapacitated.
Service agreements
The Chairman and 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 ®xed 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 service agreement by BT.
Outside appointments
The Committee believes there are signi®cant bene®ts to
both the company and the individual from executive
directors accepting non-executive directorships of
companies outside BT. The Committee will consider up to
two external appointments for which a director may retain
the fees.
Non-executive directors' contracts of appointment
Non-executive directors have contracts of appointment.
These cover, amongst other things, the initial terms for
which they are appointed, a general statement of their role
and duties, the fees they will receive as a director, including
serving on one Board committee, and supplementary fees
for additional work, such as being a member of more than
one Board committee.
Non-executive directors are normally appointed for an
initial period of three years. During that period, either party
can give the other at least three months' notice. At the end
of the period the appointment may be continued by mutual
agreement.
Non-executive directors' remuneration
Six of the directors on the Board are non-executive
directors who, in accordance with BT's articles of
60 BT Group Annual Report and Form 20-F 2002