BT 2016 Annual Report Download - page 127

Overview The Strategic Report Governance Financial statements Additional information
133
The committee considered the treatment of Tony’s outstanding
share awards under the DBP and ISP. Given that his departure is
by mutual agreement with the company and there is an orderly
transition in place, he is considered to be a good leaver for the
purposes of the DBP and ISP. As such, his unvested DBP awards
will be preserved and vest in accordance with their original
timeframes. In line with the committee’s typical approach for the
treatment of good leavers under the ISP, it has applied pro-rating
to the awards by preserving the oldest two cycles and ‘lapsing’
the most recent award. In practice, this means that his 2014 and
2015 ISP awards will subsist in full (subject to achievement of the
relevant performance conditions), whilst the committee has chosen
not to make an ISP award in 2016 (in lieu of it being granted and
subsequently lapsed).
Arrangements for the incoming Group Finance
Director
As announced on 18 March 2016, Simon Lowth will join the
company on 4 July 2016, moving into the Group Finance Director
role following a handover period.
In reaching remuneration terms, we maintained our approach of
setting base salaries below the median for our comparator group,
with a significant proportion of total remuneration being variable
and linked to corporate performance.
He will receive a base salary of £700,000. He will have
entitlement to our standard benefits package, including a car
allowance and healthcare and he will receive a pension allowance
of 30% of salary.
In line with the approach which we took with the Group Chief
Executive’s remuneration package upon his appointment, we have
taken the opportunity to rebalance the variable pay package,
placing less emphasis on short-term and more on sustainable long-
term performance. As such, he will have a maximum opportunity
of 180% of salary under the annual bonus (compared to 210%
for the current incumbent), one-third of which will be deferred
for three years. Meanwhile his maximum ISP opportunity will be
350% of salary (compared to 280% for the incumbent).
Furthermore, the shareholding requirement has been increased.
He will be required to build-up and hold a shareholding in the
company equivalent to 250% of base salary.
Simon will not receive any buy-out awards in connection
with his recruitment.
Directors’ share ownership
The committee believes that the interests of the executive directors
should be closely aligned with those of shareholders. The deferred
shares and incentive shares provide considerable alignment.
To increase the alignment between shareholders and executive
directors, the Chief Executive is required to build up a shareholding
equal to 300% of salary, and the Group Finance Director 150% of
salary. The aim of this personal shareholding policy is to encourage
the build up of a meaningful shareholding in the company over
time by retaining shares which they have received under an
executive share plan (other than shares sold to meet a National
Insurance contribution or income tax liability) or from purchases
in the market.
As mentioned above the incoming Group Finance Director, Simon
Lowth, will be required to build up a shareholding equal to 250%
of salary.
The value of the BT shares to be used in determining whether
the minimum shareholding requirement has been reached is the
average BT share price over the preceding 12 months or, if higher,
the share price at the acquisition date.
At 31 March 2016, both of the executive directors met the
shareholding requirements, as set out in the table below:
Executive director
Personal shareholding as a
percentage of salary
Gavin Patterson 1,149%
Tony Chanmugam 315%
The following table shows the total unvested interests held by the
executive directors in the ISP and DBP. The numbers represent
the maximum possible vesting levels. The ISP awards will only
vest to the extent the performance conditions are met over a
three-year period. Full details of all ISP and DBP awards, including
performance periods and vesting conditions, are set out on pages
134 to 135.
Unvested interests in shares (audited)
ISP (subject to performance) DBP (not subject to performance)
1 April 201531 March 2016 1 April 2015 31 March 2016
Gavin Patterson 2,408,265 2,734,526 516,553 376,092
Tony Chanmugam 1,411,743 1,270,600 521,229 337,943
The following table shows share options held by the directors.
As at 31 March 2016 none of the directors held share options
with performance conditions.
Share options held without performance conditions –
saveshare (audited)
Share
options
at 1 April
2015
Options
granted
during
year
Options
exercised
during
year
Value at
date of
exercise (£)
31 March
2016
Sir Michael Rake 1,485 –1,485 6,875 –
5,172 – – – 5,172
Gavin Patterson 5,642 – – – 5,642
Tony Chanmugam 6,024 – – – 6,024
501 – – – 501
Sir Michael Rake exercised an option over 1,485 shares on
3 August 2015. No other saveshare options were exercised by
the directors during the year. There were no vested but unexercised
options at the year end.