BT 2012 Annual Report Download - page 82

Governance
aligns remuneration metrics with results delivered by the group's trading
activities and key measures of performance in our reported results.
Customer service is measured by rigorous and challenging ‘right
first time’ and ‘customer issue reduction’ metrics across each line of
business. Although we will keep these measures under review, they are
directly linked to cost reductions as well as to customer satisfaction and
are measured objectively.
The ESG measure is aligned to our strategy and is assessed by the Chief
Executive for each senior executive, and by the Chairman for the Chief
Executive himself. Assessment is based upon BT’s regular employee
survey as well as health and safety and sustainability measures.
The Committee are satisfied that the targets set out are appropriate and
stretching, for example adjusted EPS growth of 13% was around target
performance.
Ian Livingston’s cash bonus represented 145.3% of his current salary
(2011: 157.25%), Tony Chanmugam’s cash bonus represented 113.1%
of his current salary (2011: 118.5%) and Gavin Patterson’s cash bonus
represented 107.6% of his current salary (2011: 123%).
The cash element of the annual bonus is set out in the table on page 84.
The deferred share element of the bonus is set out on page 85.
Incentive Share Plan
The long-term share element of executive remuneration is the Incentive
Share Plan (ISP). Details of the ISP arrangements are set out below.
The Chief Executive received an award of incentive shares with a value
of 2.5x salary (2011: 2.5x salary). Other executive directors received
awards with a value of 2x salary (2011: 2x salary). The awards of
incentive shares under the ISP during the year, incentive shares awarded
in prior years, and the vesting of incentive shares awarded in June 2009
under the ISP are set out on page 86.
Proportion of fixed and variable remuneration
The composition of each executive director’s performance-related
remuneration, excluding pension, is as follows:
2013 targeta
2012 actualb
Ian Livingston
2013 targeta
2012 actualb
Tony Chanmugam
2013 targeta
2012 actualb
Gavin Patterson
40% 20% 60% 80%
100%
0%
Fixed Variable cash Variable shares
21.05 26.32 52.63
33.53 48.95 17.52
26.67 26.67 46.67
42.51 48.43 9.06
26.67 26.67 46.67
41.00 44.69 14.31
a Target remuneration comprises current base salary, on-target annual cash bonus and the
expected value of awards under the deferred bonus and incentive share plans.
b Actual remuneration comprises base salary, actual cash bonus and the value received
from deferred shares and incentive shares (awards granted in 2008 and vested in 2011)
during the financial year.
Remuneration in 2013
The Committee concluded a review of remuneration strategy during the
year. The measure for free cash flow will be changed to a normalised
basis consistent with our financial outlook to remove the impact of
the cash tax benefit relating to pension deficit payments. This change
will apply to both the 2013 annual bonus and ISP 2012 awards. The
Committee is not proposing any other changes to remuneration policy
and structure for 2013.
The Committee has considered the level of total remuneration that
would be payable under different performance scenarios and is satisfied
that, as the graph below illustrates, executive pay remains closely
aligned with shareholders’ interests.
Comparison of BT’s potential total compensation for the
Chief Executive under various performance scenarios, with
reference to the BT pay benchmarking comparator group
Target
Performance delivered
Maximum
Minimum performance – Base salary only.
Target performance – Base salary plus ‘on-target’ annual bonus plus ‘target’ vesting
on long-term incentives.
Maximum performance – Base salary plus maximum annual bonus and maximum
vesting on long-term incentives.
Appropriate share price growth assumptions have been incorporated in all
scenarious illustrated.
Minimum
Upper market range Lower market range BT
0
2
4
6
8
10
12
£m
Total direct compensation
The table below sets out the proposed ISP 2012 awards that are
expected to be made in June 2012. The performance criteria for the
awards is set out below.
Director ISP Awarda
Ian Livingston 1,078,088 shares
Tony Chanmugam 498,834 shares
Gavin Patterson 531,469 shares
a ISP grant to be awarded. An estimate of the number of shares awarded calculated using
the closing market share price on 8 May 2012.
Reports of the Board Committees
Overview
BusinessStrategy
Performance
Governance
Financial statements
Additional information Overview
BusinessStrategy
Performance
Governance
Financial statements
Additional information