BT 2016 Annual Report Download - page 122

BT Group plc
Annual Report 2016
128
Review of the year
At the 2015 AGM shareholders endorsed our approach to
remuneration and its disclosure, with 98.6% of votes cast
in favour of the Annual Remuneration Report 2014/15.
During 2015/16 we continued to operate within the
Remuneration Policy (the Policy) approved at the 2014 AGM.
The Policy is reproduced on pages 142 to 148.
The committee’s approach to remuneration includes emphasis on
rewarding executives for delivering on the key strategic goals of
the group, including the acquisition of EE. We considered whether
the previously set performance measures for the existing Incentive
Share Plan (ISP) awards remained appropriate. More detail on this
can be found on page 138.
We announced during the year that after a long and distinguished
career the Group Finance Director, Tony Chanmugam, would leave
by mutual agreement and therefore the committee decided to
treat him as a good leaver. Further details are provided on pages
132 to 133. In addition, to help with a smooth hand over to his
successor he has agreed to stay on in an integration team lead
position to ensure that we are on track to deliver the integration
synergies and wider key performance measures associated with
the EE acquisition.
Outcomes for the year
The committee assessed the executive directors’ performance
against both long-term and short-term targets.
For annual bonus purposes, both executive directors performed
well against their financial targets. However, as sucient progress
was again not made realising improvements in our customer
service levels no bonus was paid for this component.
We have also assessed each director’s contribution against their
personal performance measures.
As a result, the annual bonus for the Chief Executive was
45% of maximum and for the Group Finance Director was
43% of maximum. In both cases bonuses are lower than last
year, reecting the above mentioned poor customer service
performance against the target. In keeping with past practice,
part of the annual bonus is deferred for three years and paid
in shares. The detail of performance against the annual bonus
measures is set out on page 130.
Total Shareholder Return (TSR) of 88.9% placed BT in the upper
quartile of its comparator group over the three-year performance
period of our 2013 ISP. Cumulative three-year normalised free
cash ow performance was £8.1bn which was towards the
upper end of the ISP range of £7.4bn to £8.4bn. We returned
above threshold performance against our revenue measure.
The 2013 ISP vested at 82.01% based on this performance.
More information on the ISP vesting is on pages 130 to 131.
Employees also participated in BT’s financial success. BT’s
performance in the year reects a great deal of expertise, hard
work and commitment. In August 2015, around 23,000 people
in our savings-related share option plans (saveshare) were able to
buy shares – mostly at £1.04 and the rest at £1.89 – representing
an average gain of around £10,200 and £4,400 respectively.
We continue to believe that BT’s share plans help as many of our
people as possible to share in BT’s success.
Looking ahead
Following approval of the acquisition of EE from the Competition
and Markets Authority, BT completed the transaction in January
2016. As we indicated last year, we reassessed the Policy to
ensure that our incentive structure continues to be appropriate
for the enlarged group. As reported above, we concluded that
the remuneration structure should not change and accordingly,
there is no requirement to present a new remuneration policy
for shareholder approval at the 2016 AGM.
We reviewed the performance of our executive directors and
consistent with our approach to establish base pay below the
median against our comparator group, we agreed a salary increase
of £24,325 per annum for the Chief Executive, an increase of
2.5%. The increase takes eect in June 2016. This salary increase
is consistent with the approach taken for substantially all our UK
employees who received an average increase of 2.5%. Pay awards
for this group of employees are agreed through trade union
consultation and collective bargaining arrangements.
We also resolved that no salary increase should be made to
the Group Finance Director in light of his stepping down later
in 2016/17.
Finally, we agreed the remuneration package for the incoming
Group Finance Director, Simon Lowth, who joins the company
on 4 July which is set out on page 133.
Throughout this past year, the committee has maintained the
link between pay and performance and will continue to do so.
Tony Ball
Chairman of the Remuneration Committee
4 May 2016
Report on Directors’
Remuneration