BTPLC Annual Report 2005 - Report on directors’ remuneration

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Remuneration Review

This part of the Report on directors’ remuneration is subject to audit.

Directors’ emoluments

Directors’ emoluments for the financial year 2004/05 were as follows:

	Basic salary and fees	Pension allowance net of pension contributions	Total salary and fees	Annual cash bonus	Expenses allowance	Other benefits excluding pension	Total 2005	Total 2004

	£000	£000	£000	£000	£000	£000	£000	£000

Sir Christopher Bland^{^d}	500	–	500	–	–	32	532	532
B Verwaayen^{^cdf}	700	127	827	448	196	41	1,512	1,968
A Green^{^df}	444	–	444	204	–	36	684	791
H Lalani^{^def}	64	–	64	136	–	7	207	–
I Livingston^{^bdf}	469	120	589	198	19	10	816	913
Dr P Reynolds^{^bdf}	400	–	400	213	19	21	653	737
Sir Anthony Greener	115	–	115	–	–	–	115	96
M van den Bergh	55	–	55	–	–	–	55	44
C Brendish	50	–	50	–	–	–	50	39
L R Hughes	21	–	21	–	–	–	21	40
Baroness Jay	50	–	50	–	–	–	50	39
J Nelson	50	–	50	–	–	–	50	39
C G Symon	50	–	50	–	–	–	50	40
P Danon^{^bdfh}	413	–	413	250	17	21	701	750

	3,381	247	3,628	1,449	251	168	5,496	6,028

^{^a}

Balance or part of the pension allowance for the financial year 2004/05 – see ‘Pensions’ below.

^{^b}

Ian Livingston, Paul Reynolds and Pierre Danon each received a monthly cash allowance in lieu of a company car equivalent to £18,500 per annum.

^{^c}

Ben Verwaayen was entitled to a housing allowance of £250,000 per annum until 13 January 2005. In the financial year 2004/05, £196,000 was paid in respect of that year (2004 – £250,000). These amounts are included in the table above under Expenses allowance.

^{^d}

Other benefits includes 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. In addition, Paul Reynolds and Pierre Danon had interest free loans – see ‘Loans’ below.

^e	Hanif Lalani joined the Board on 7 February 2005.

^{^f}

Deferred annual bonuses payable in shares in three years’ time, were awarded to Ben Verwaayen £224,000 (2004 – £429,500), Andy Green £102,000 (2004 – £168,000), Hanif Lalani £68,000 (2004 – £nil), Ian Livingston £99,000 (2004 – £162,500), Paul Reynolds £106,500 (2004 – £147,500) and Pierre Danon £nil (2004 – £129,500).
When added to the amounts paid or payable for the 2004/05 financial year, in the table above, the total emoluments of Ben Verwaayen were £1,736,000 (2004 - £2,397,500), Andy Green £786,000 (2004 – £959,000), Hanif Lalani £275,000 (2004 – £nil), Ian Livingston £915,000 (2004 – £1,075,500), Paul Reynolds £759,500 (2004 – £884,500) and Pierre Danon £701,000 (2004 – £879,500).

^{^{^g}}

Retirement benefits are accruing to three directors (2004 – three) under defined contribution arrangements and to three directors (2004 – three) and one former director under a defined benefit scheme.

^{^h}

Pierre Danon resigned from the Board on 28 February 2005.

The annual salaries of the Chairman, Ben Verwaayen, Pierre Danon and Paul Reynolds remained unchanged during the financial years 2003/04 and 2004/05. On 1 January 2005, the annual salaries of Andy Green and Ian Livingston increased from £425,000 to £500,000 and £450,000 to £525,000, respectively. Hanif Lalani joined the Board on 7 February 2005 on an annual salary of £400,000. Following this year’s salary review, the Committee decided that there should be no general increase from 1 June 2005 in basic salaries.
     A special retention arrangement was established for Hanif Lalani on 1 July 2004, when he was CFO, BT Wholesale, under which he will receive a lump sum cash payment of £150,000 on 30 June 2006, provided he is still an employee of the company on that date. The award will be forfeited without compensation if Mr Lalani resigns or his employment is terminated by the company with cause before that date.
     Pierre Danon’s pro rata bonus in respect of the financial year 2004/05 until he resigned from the Board on 28 February 2005 was based on the achievement of corporate and line of business objectives and on the Committee’s view on his outstanding contribution to BT. All his executive share awards and options lapsed on his resignation. The annual bonus of Hanif Lalani relates to the whole year and is based solely on line of business objectives. Ian Livingston’s annual bonus was based solely on the achievement of corporate objectives.
     Annual cash bonus awards in respect of the financial year 2004/05, which are not pensionable, to executive directors ranged from 38% to 64% of current salary (2004 – 58% to 123%).

Former directors

Yve Newbold retired on 31 August 2004 as a member of the Community Support Committee for which she received fees in the financial year 2004/05 of £2,708. She also received fees of £2,000 as a member of BT’s Social Policy Leadership Panel, which she left on 16 November 2004. Dr Iain Anderson retired in June 2004 as chairman BT Scotland, for which he received fees in the financial year 2004/05 of £3,000.
Sir Peter Bonfield received, under pre-existing arrangements, a pension of £340,000 payable in the financial year 2004/05 (2004 – £331,000).

Loans

Prior to the date of their appointment to the Board on 19 November 2001, Pierre Danon and Paul Reynolds each had interest-free loans from the company to assist with relocation of £375,000 and £300,000, respectively. At 31 March 2005, Pierre Danon owed £209,374 (2003 – £243,750), which is repayable by 1 June 2005, and Paul Reynolds owed £230,000 (2003 – £260,000). During the financial year 2004/05, the maximum amount outstanding was £503,750. There are no outstanding loans granted by any member of the BT group to any other of the directors or guarantees provided by any member of the BT group for their benefit.

Pensions
Sir Christopher Bland is not a member of any of the company pension schemes, but the company matches his contributions, up to 10% of the earnings cap, to a personal pension plan. Company contributions of £10,200 were payable in respect of the financial year 2004/05. The earnings cap is a restriction on the amount of pay which can be used to calculate contributions and benefits due to a tax approved pension scheme.

     Ben Verwaayen is not a member of any of the company pension schemes, but the company has agreed to pay an annual amount equal to 30% of his salary towards pension provision, increased from 20% and effective on 1 January 2005. The company paid £30,600 into his personal pension plan plus a cash payment of £126,900 representing the balance of the pension allowance for the financial year 2004/05. BT also provides him with a lump sum death in service benefit of four times his salary.
     Ian Livingston is not a member of any of the company pension schemes, but the company has agreed to pay an annual amount equal to 30% of his salary towards pension provision. The company paid £20,400 into his personal pension plan plus a cash payment of £120,225 representing the balance of the pension allowance for the financial year 2004/05. BT also provides him with a lump sum death in service benefit of four times his salary.
     Andy Green is a member of the BT Pension Scheme. From 31 December 1997 the company has been purchasing an additional 203 days of pensionable service each year to bring his pensionable service at age 60 up to 40 years. A two-thirds widow’s pension would be payable on his death.
     Hanif Lalani is a member of the BT Pension Scheme. From 7 February 2005, the company has been purchasing an additional 23 days of pensionable service each year to bring his pensionable service at age 60 up to 40 years.
     Paul Reynolds is a member of the BT Pension Scheme. From 1 July 1996 the company has been purchasing an additional 109 days of pensionable service each year to bring his pensionable service at age 60 up to 40 years. A two-thirds widow’s pension would be payable on his death.
     Pierre Danon resigned as a director on 28 February 2005. His pension accrued at the rate of one-thirtieth of his final salary for each year of service. In addition, a two-thirds widow’s pension would have been payable on his death. He was a member of the BT Pension Scheme, but as he was subject to the earnings cap the company agreed to increase his benefits to the target level by means of a non-approved, unfunded arrangement.

The table below shows the increase in the accrued benefits, including those referred to above, to which each director has become entitled during the year and the transfer value of the increase in accrued benefits:

									Change in transfer value c-d less directors’ contributions	Additional accrued benefits earned in the year		Transfer value of increase in accrued benefits less directors’ contributions

	2005		2004		2005		2004		2005	2005		2005
	£000	^{^a}	£000	^{^b}	£000	^{^c}	£000	^{^d}	£000	£000	^{^e}	£000	^{^f}

P Danon^{^h}	66		52		696		519		163	12		113
A Green	131		117		1,848		1,553		268	10		115
H Lalani^ⁱ	73		57		668		494		158	14		109
P Reynolds	123		116		1,578		1,405		149	3		12

^{^a-d}

As required by the Companies Act 1985 Schedule 7A.

^{^a-b}

These amounts represent the deferred pension to which the directors would have been entitled had they left the company on 31 March 2004 and 2005, respectively.

^{^c}

Transfer value of the deferred pension in column (a) as at 31 March 2005 calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. The transfer value represents a liability of the company rather than any remuneration due to the individual and cannot be meaningfully aggregated with annual remuneration, as it is not money the individual is entitled to receive.

^{^d}

The equivalent transfer value but calculated as at 31 March 2004 on the assumption that the director left service at that date.

^{^e}

The increase in pension built up during the year, net of inflation.

^{^f}

The transfer value of the pension in column (e), less directors’ contributions.

^{^g}

Directors’ contributions in the financial year 2004/05 were as follows: Pierre Danon, £14,025 (2004 – £14,580); Andy Green, £26,625 (2004 – £25,500); Hanif Lalani £16,300 (2004 – £13,350) and Paul Reynolds, £24,000 (2004 – £24,000).

^{^h}

Pierre Danon resigned as a director on 28 February 2005.

^ⁱ	Hanif Lalani joined the Board on 7 February 2005.

Share options held during the year ended 31 March 2005



	1 April 2004 (or date of appointment)		Granted		Lapsed	31 March 2005	Option price per share		Usual date from which exercisable	Usual expiry date

Sir Christopher Bland	314,244	^{^a}	–		–	314,244	318	p	01/05/2004	01/05/2011

B Verwaayen	1,121,121	^{^b}	–		–	1,121,121	250	p	11/02/2005	11/02/2012
	935,830	^{^c}	–		–	935,830	187	p	29/07/2005	29/07/2012
	561,500	^{^d}	–		561,500	–	187	p	29/07/2005	29/07/2012
	1,052,632	^{^e}	–		–	1,052,632	199.5	p	24/06/2006	24/06/2013
	–		546,875	^{^f}	–	546,875	192	p	24/06/2007	24/06/2014

	3,671,083		546,875		561,500	3,656,458

A Green	2,905	^{^g}	–		2,905	–	255	p	14/08/2005	13/02/2006
	568,190	^{^c}	–