BT 2007 Annual Report Download - page 61

60 BT Group plc Annual Report & Form 20-F
lump sum equal to four times salary is payable on death in
service. The benefits for the executive directors who are covered
by this are set out on page 64.
Pension provision for all executives is based on salary alone –
bonuses, other elements of pay and long-term incentives are
excluded.
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 certain executive directors 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 of 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. During the financial year
2006/07, Sir Christopher Bland’s service agreement was
extended to provide for his resignation as Chairman on
25 September 2007 and his resignation as a director on
30 September 2007 instead of at the conclusion of the 2007
AGM. On termination of his contract by BT before 30 September
2007, he is entitled to payment of salary and the value of any
benefits until that date. Sir Mike Rake, who will replace Sir
Christopher Bland as Chairman, entered into a service agreement
as a director and Chairman to take effect from 26 September
2007. Ben Verwaayen’s contract entitles him on termination of
his contract by BT to payment of £700,000. The contracts of
Franc¸ois Barrault, 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 an executive
director (other than that of the Chairman, Franc¸ois Barrault 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. This clause was not
included in the contracts of Franc¸ois Barrault and 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 as a
non-executive director of United Parcel Service (UPS), receives
an annual fee of US$75,000. On 1 May 2006, he was granted
1,051 shares of restricted UPS common stock amounting to
US$85,000 and on 8 February 2007 he was granted 1,501
shares of UPS restricted common stock amounting to
US$110,000. Ian Livingston received an annual fee of £45,000
as a non-executive director of Ladbrokes plc until he resigned as
a director on 31 October 2006. Paul Reynolds, as a non-
executive director of E-Access in Japan, receives an annual fee
of ¥3,200,000 (approximately £14,000). Andy Green is a non-
executive director of NAVTEQ in the US. He is entitled to receive
an annual fee of US$60,000 and an annual grant of restricted
stock units to the value of US$125,000. Franc¸ois Barrault, as a
director of eServGlobal in Australia, receives an annual fee of
E36,000. In 2003, he was granted 500,000 options over
eServGlobal shares; 50% have an exercise price of A$0.15 per
option and 50% have an exercise price of A$0.40 per option.
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 in the Report of the
Directors. The letters of appointment of non-executive directors
are terminable on notice by the company without compensation.
Non-executive directors’ remuneration
Eight 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 Board last reviewed fees in 2004 and plans to review
them again in the 2007/08 financial year.
The basic fee for non-executive directors is £40,000 per year.
An additional fee for membership of a Board committee is
£5,000 per year and a further £5,000 for chairing a committee.
Sir Anthony Greener, who was Deputy Chairman and senior
independent director until he retired on 30 September 2006 and
also chaired both the Remuneration Committee and the Audit
Committee, received total fees of £115,000 per year. Maarten
van den Bergh, who was appointed Deputy Chairman and senior
independent director from 1 October 2006 and chairman of the
Remuneration Committee from that date, and who is also
chairman of the Pension Scheme Performance Review Group,
receives total fees of £120,000 per year. Carl Symon receives an
annual fee of £70,000 as chairman of the Equality of Access
Board (a Board Committee), which was established on
1 November 2005.
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.
Report of the Directors Corporate governance