BT 2005 Annual Report Download - page 61

Other benefits
Other benefits for the Chairman and the senior
management team include some or all of the following:
company car, fuel or driver, personal telecommunications
facilities and home security, medical and dental cover for
the director and immediate family, special life cover,
professional subscriptions and personal tax planning and
financial 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
It is the policy for the Chairman and executive directors to
have service agreements providing for one year’s notice.
It may be necessary on recruitment to offer longer initial
periods to new directors from outside BT, or
circumstances may 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, including in the event of early termination
of the contract by BT. Sir Christopher Bland’s contract
expires at the conclusion of the AGM in 2007. On
termination of his contract by BT before that date, he is
entitled to payment of salary and the value of benefits for
the period of 12 months from date of termination, or until
the conclusion of the company’s AGM in 2007, if that
period is shorter. Ben Verwaayen’s contract entitles him
on termination of his contract by BT to payment of
£700,000. The contracts of Andy Green, Hanif Lalani, Ian
Livingston and Paul Reynolds entitle them on termination
of their contract by BT to payment of salary and the value
of benefits until the earlier of 12 months from notice of
termination or the director obtaining full-time
employment. If the contract of a director (other than that
of the Chairman and Hanif Lalani) is terminated by BT
within one year of BT entering into a scheme of
arrangement or becoming a subsidiary of another
company, he will be entitled to receive the higher of that
current year’s on-target bonus or the previous year’s
bonus, the market value of shares awarded under an
employee share ownership plan or deferred bonus plan
that have not vested, together with a year’s salary and the
value of any benefits.
The Committee has reviewed contracts taking into
account the joint statement of best practice on executive
contracts and severance by the Association of British
Insurers and the National Association of Pension Funds,
and other relevant guidelines, and believes that contract
terms are generally in line with best practice. The clause
described above dealing with termination following BT
entering into a scheme of arrangement or becoming a
subsidiary of another company will be excluded from
contracts for new appointments, as was the case for
Hanif Lalani.
Outside appointments
The Committee believes that 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 up
to two external appointments (of which only one may be
to the Board of a major company), for which a director
may retain the fees. Ben Verwaayen was appointed as a
non-executive director of United Parcel Service, Inc. on
17 March 2005 and is entitled to receive an annual fee of
US$75,000. On joining the Board, he received 336 shares
of restricted UPS common stock amounting to
US$25,000 and will receive an US$85,000 restricted
stock grant annually. Ian Livingston receives an annual fee
of £38,000 as a non-executive director of Hilton Group
plc. Paul Reynolds was appointed a non-executive director
of E-Access in Japan on 29 June 2004 and receives an
annual fee of ¥3 million (approximately £15,000). He was
granted an option over 250 shares at ¥139,000
(approximately £695) per share on 1 July 2004. Pierre
Danon, who resigned on 28 February 2005 as a director
of BT, was a non-executive director of EMAP plc and
received an annual fee of £35,000.
Non-executive directors’ letters of appointment
Non-executive directors have letters of appointment. They
are 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. Further details
of appointment arrangements for non-executive directors
are set out on page 50 in the section dealing with
corporate governance issues. The letters of appointment
of non-executive directors are terminable on notice by the
company without compensation.
Non-executive directors’ remuneration
Seven of the directors on the Board are non-executive
directors who, in accordance with BT’s articles of
association, cannot individually vote on their own
remuneration. Non-executive remuneration is reviewed by
the Chairman and the Chief Executive and discussed and
agreed by the Board. Non-executive directors may attend
the Board discussion but may not participate in it.
The fees paid to non-executive directors were
increased with effect from 1 January 2004 to reflect their
increasing responsibilities and time commitments.
Non-executive directors’ fees were last changed five years
previously, on 1 January 1999.
The basic fee for non-executive directors is £40,000
per year. An additional fee for membership of Board
committees is £5,000 per year, other than for the Pension
Scheme Performance Review Group for which no fee is
paid. Sir Anthony Greener, Deputy Chairman and senior
non-executive director, who also chairs both the
Remuneration Committee and the Audit Committee,
receives total fees of £115,000 per year.
To align further the interests of the non-executive
directors with those of shareholders, the company’s policy
is to encourage these directors to purchase, on a
voluntary basis, £5,000 of BT shares each year. The
directors are asked to hold these shares until they retire
from the Board. This policy is not mandatory.
No element of non-executive remuneration is
performance-related. Non-executive directors do not
participate in BT’s bonus or employee share plans and are
not members of any of the company pension schemes.
60 BT Group plc Annual Report and Form 20-F 2005 Report on directors’ remuneration