BT 2012 Annual Report Download - page 84

Governance
Retention shares
Awards of retention shares are used by exception only and principally as
a recruitment or retention tool. As a result, shares currently under award
are not generally subject to a corporate performance target. The length
of the retention period before awards vest is flexible, although this
would normally be three years unless the Committee agrees otherwise.
The shares are transferred at the end of the specified period if the
individual is still employed by BT and any performance conditions are
met. No awards of retention shares were made to executive directors,
but two senior executives were granted an award in 2012.
Share options
No share options have been awarded under the Global Share Option
Plan (GSOP) since 2004 and there is no intention to award options
in 2013. Details of share options held by directors at the end of the
financial year are shown in the table on page 87.
Clawback
The rules of the executive share plans provide for a clawback of
unvested awards in circumstances where the Committee becomes aware
of facts which would, in its discretion, justify such reduction.
Other share plans
The Chairman and executive directors may participate in BT’s all-
employee share plans, the Employee Sharesave Scheme, Employee
Share Investment Plan (ESIP) and Allshare International, on the same
basis as other employees.
Dilution
Treasury shares are generally used to satisfy the exercise of share
optionsand the vesting of share awards for the executive and all-employee
share plans. At the end of 2012, treasury shares equivalent to 9.2% of the
issued share capital would be required for these purposes. It is estimated
that treasury shares equivalent to approximately 2.2% of the issued share
capital will be required for all the employee share plansin2013.
Other matters
Service agreements
It is group policy for the Chairman and executive directors to have
service agreements, approved by the Committee, providing for one
year’s notice by the company and six months’ notice by the director.
All of the service agreements contain provisions dealing with the
removal of a director for poor performance, including in the event of
early termination of the contract by BT. The contracts of the Chairman,
Ian Livingston, Tony Chanmugam and Gavin Patterson entitle them on
termination of their contract by BT to payment of salary and the value
of benefits (pension benefits (including life cover), health cover, dental
cover and car) until the earlier of 12 months from notice of termination
or the director obtaining full-time employment. No director will receive
a bonus or other payments on a change of control. The Committee
reviewed during the year arrangements for senior executives leaving
under ‘good leaver’ circumstances and the role of the Committee in the
exercise of discretion in those circumstances.
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
Reports of the Board Committees
party can give the other at least three months’ notice of termination and
the appointment automatically terminates in the event of a director not
being re-elected by shareholders. The appointment of a non-executive
director is terminable on notice by the company without compensation.
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 82. The letters of appointment
are open for inspection by the public at the registered office of the
company.
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.
In line with the approach taken by the executive directors, no increase in
fee is proposed for any non-executive director in 2013.
The basic fee for non-executive directors is £62,000 per year (2011:
£62,000). There are additional fees for membership and chairing a
Board Committee, details of which are given in the table below:
Committee Member’s fee
Additional
Chairman’s fee
Audit & Risk £15,000 £15,000
Remuneration £10,000 £10,000
Nominating & Governance £7,500 £5,000
Other Board Committees £5,000 £5,000
Patricia Hewitt, as Senior Independent Director, chair of the
Remuneration Committee , chair of the BT Pensions Committee and a
member of the
Audit & Risk Committee , receives total fees of £159,500
per year. Phil Hodkinson receives an additional annual fee of £72,500 as
chairman of the EAB (a Board Committee).
An additional fee of £2,000 per trip is paid to those non-executive
directors travelling regularly from overseas on an inter-continental basis
to Board and Board Committee meetings.
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, BT shares to the value of £5,000
each year. The directors are asked to hold these shares until they retire
from the Board. This policy is not mandatory. Current shareholdings are
shown on page 83.
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.
Committee evaluation
The Committee reviews its performance with Board members and other
participants. We continued to strengthen the Committee’s performance,
for example by providing time before each meeting for private
discussions between members and its advisors.
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