|
The Report on directors’
remuneration is divided into the following sections:
|
•
|
REMUNERATION
POLICY (NOT AUDITED) |
| |
(i) |
Constitution
and process
|
| |
(ii) |
Packages
and financial year 2005/06 operation
|
| |
(iii) |
Annual
package – financial year 2006/07
|
| |
|
Executive
share ownership
|
| |
|
Non-executive
directors’ letters of appointment
|
| |
|
Non-executive
directors’ remuneration
|
| |
|
Directors’
service agreements and contracts of appointment
|
| • |
REMUNERATION
REVIEW (AUDITED) |
| |
|
Directors’
emoluments
|
| |
|
Share
awards under long-term incentive schemes
|
| |
|
Vesting
of outstanding share awards and options
|
| |
|
Share
awards under the Employee Share Investment Plan (ESIP)
|
|
This
part of the Report on directors’ remuneration is not
subject to audit.
|
|
(i)
Constitution and process
|
The directors consider
that BT has, thoughout the year, complied with the provisions set
out in Section 1 of the 2003 Combined Code on Corporate Governance.
Shareholders will be invited to approve this report at the company’s
2006 AGM. The Board is ultimately responsible for both the structure
and amount of executive remuneration, but it has delegated prime
responsibility for executive remuneration to the Remuneration Committee.
The Committee is made up wholly of independent non-executive directors.
The terms of reference of the Committee are available on the company’s
website at www.bt.com/committees.
The Committee’s role is to set the remuneration policy and
individual remuneration packages for the Chairman and the senior
management team, comprising the executive directors, members of
the Operating Committee (OC) and other senior executives reporting
to the Chief Executive. This includes approving changes to the company’s
long-term incentive plans, recommending to the Board those plans
which require shareholder approval and overseeing their operation.
In this role the Committee also monitors the structure of reward
for executives reporting to the senior management team and determines
the basis on which awards are granted under the company’s executive
share plans. The Committee met four times during the financial year
2005/06. Sir Anthony Greener has chaired the Committee since 18
July 2001. Other members of the Committee who served during the
financial years 2004/05 and 2005/06 were:
| • |
Matti Alahuhta
(appointed 7 February 2006) |
| • |
Maarten
van den Bergh
|
| • |
Lou Hughes |
| • |
Margaret
Jay
|
Lou
Hughes stepped down from the Committee on 31 March 2006 when he
left the Board.
The
Chairman and Chief Executive are invited to attend meetings. They
are not present when matters affecting their own remuneration arrangements
are considered. No director or executive is involved in any decision
relating to his or her remuneration. Non-executive directors who
are not members of the Committee are entitled to receive papers
and minutes of the Committee. The Committee had access during the
year to professional advisers, both from within the company and
externally. Towers Perrin (Remuneration consultants) and Kepler
Associates (Remuneration consultants), who were appointed by the
company; Ben Verwaayen, Chief Executive; Hanif Lalani, Group Finance
Director; Alex Wilson, Group HR Director and Larry Stone, Company
Secretary, provided advice that materially assisted the Committee
in relation to directors’ remuneration in the financial year
2005/06. Remuneration consultants provide a range of data and advisory
services covering all aspects of executive pay, bonus arrangements,
shares and benefits. The Committee agreed that its Remuneration
consultants, Kepler Associates, may advise both the Committee and
BT, and should be invited to attend meetings when major remuneration
policy issues were discussed. Towers Perrin provides market data.
BT’s
executive remuneration policy is to reward employees competitively,
taking into account individual line of business and company performance,
market comparisons, and the competitive pressures in the information
and communications technology industry as BT focuses on growth through
transformation. Base salaries are positioned around the mid-market,
with total direct compensation (basic salary, annual bonus –
cash and deferred shares – and the expected value of any long-term
incentives) to be at the upper quartile only for sustained and excellent
performance. There are no plans to change this policy. A significant
and increasing proportion of the total executive remuneration package
is linked to line of business and/or corporate performance. Remuneration
arrangements and performance targets are kept under regular review
to achieve this.
|
(ii)
Packages and financial year 2005/06 operation
|
The remuneration package
is made up of some or all of the following:
Salaries are reviewed
annually, but increases are made only where the Committee believes
that adjustments are appropriate to reflect contribution, increased
responsibilities and/or market pressures. No base pay changes were
proposed or made for executive directors in 2005/06, save that the
Committee agreed an increase in annual base salary effective from
1 August 2005 for Paul Reynolds to reflect his responsibility
for delivering the 21st Century Network and a number of key productivity
and process improvements.
Performance-related
remuneration
|
The annual bonus plan
is designed to reward the achievement of results against set objectives.
For
the financial year 2005/06, on-target and maximum (requiring truly
exceptional performance) bonus levels for executive directors and
OC members, as a percentage of salary, were set at 87.5% and 175%
respectively, with approximately 43% of any bonus payable in the
form of deferred shares.
The
Committee last year increased the deferred share element of the
Chief Executive’s annual bonus but not the cash element for
the financial year 2005/06 and subsequent financial years, in order
to make his total package more retentive and competitive with those
of the leaders of the 30 largest companies in the FTSE 100.
Both the cash and shares elements are determined by performance
against corporate targets. Up to two-thirds of his bonus is paid
in deferred shares which vest after three years. This had the effect
of increasing his on-target bonus to 255% of salary, of which 85%
would be paid in cash as previously and 170% of salary would be
paid in deferred shares. His total bonus – cash and deferred
shares – is subject to an overall cap of 300% of base salary
in any one year.
Under
his contract, the Chairman is not entitled to a bonus.
Corporate
performance targets, set at the beginning of the financial year
2005/06 were weighted such that 40% of the bonus potential was based
on earnings per share, 40% on free cash flow and 20% on customer
satisfaction. Delivery against these operational targets is a key
determinant of success and supports BT’s strategy for transformation
and growth. The Committee agreed that in calculating earnings per
share for purposes of the annual bonus, volatile items which would
be reported under IFRS should be excluded. The impact of market
movements in foreign exchange and financial instruments plus the
net finance income relating to the group’s pension liabilities
were excluded from the target.
For
the three line of business Chief Executives and other relevant executives,
the importance of meeting these operational targets was recognised
by linking 100% of their potential bonus to BT’s corporate
performance. The Committee retains the flexibility to enhance or
reduce bonus awards in exceptional circumstances.
|
Achievement
against corporate targets in the financial year 2005/06:
|
Earnings
per share –
weighting 40% of target
|
|
|
Free
cash flow –
weighting 40% of target |
|
|
Customer
satisfaction – weighting 20% of target |
|
|
Total
% of target |
|
|
|
|
|
|
|
80 |
|
|
0 |
|
|
160 |
|
|
|
|
(Note
– threshold reflects 50% of target; target is 100%;
and stretch is 200%)
|
| |
The deferred share element
of the annual bonus is paid under the Deferred Bonus Plan (DBP).
The shares vest and are transferred to the executive after three
years if still employed by the company. There are no additional
performance measures for the vesting of deferred share awards. The
Committee considers that deferring a part of the annual bonus in
this way also acts as a retention measure and contributes to aligning
management with long-term shareholder interests.
The
deferred awards for Ben Verwaayen, Andy Green, Hanif Lalani, Ian
Livingston and Paul Reynolds at the end of the financial year 2005/06
are contained in the Deferred bonus plan awards
table. The initial values of the awards to be granted in respect
of the financial year 2005/06 are given in the Directors'
emoluments table.
As
a retention measure and given competitive market conditions, the
Committee decided last year to introduce an additional special bonus
arrangement for Andy Green, Chief Executive BT Global Services,
linked to performance targets for that line of business. This bonus
arrangement, payable in retention shares (see Retention shares)
which will vest three years after grant, was applied to performance
for the financial year 2005/06, and will be applied for 2006/07
and 2007/08. Awards will be linked to a sliding scale of BT Global
Services’ performance, weighted equally around revenue growth,
EBIT and cash generation. The target award is equivalent to 100%
of salary, with a maximum of 150% of salary. The first award of
retention shares with a value of £750,000 will be granted
in June 2006 and will vest in June 2009 subject to continued employment.
The BT Equity Incentive
Portfolio (the Portfolio) is designed to ensure that equity participation
is an important part of overall remuneration. It comprises three
elements: share options, incentive shares and retention shares.
Incentive shares were used for equity participation in the financial
year 2005/06. Retention shares are used only as a recruitment or
retention tool. No options were granted in the financial year 2005/06.
Under
his service agreement, the Chairman is not entitled to receive annual
grants of incentive awards or options.
Normally,
awards vest and options become exercisable only if a predetermined
performance target has been achieved. The performance measure for
outstanding awards and options is TSR (total shareholder return)
compared with a relevant basket of companies. TSR for these purposes
was calculated by New Bridge Street Consultants. TSR links the reward
given to directors with the performance of BT against the shares
of other major companies. For grants in the financial years 2001/02,
2002/03 and 2003/04, the comparator group was the FTSE 100 at 1
April in each year. For grants in the financial year 2004/05 and
in 2005/06, TSR was measured against a group of companies from the
European Telecom Sector.
At 1 April 2005, the
group contained the following companies:
BT Group
Belgacom
Cable & Wireless
Cosmote Mobile Telecommunications
Deutsche Telekom
France Telecom
Hellenic Telecommunications
O2
Portugal Telecom
KPN |
|
|
Swisscom
TDC
Telecom Italia
Telecom Italia Mobile
Telefonica
Telekom Austria
Telenor
TeliaSonera
Vodafone Group |
|
The base price at the
beginning of the performance period is calculated by averaging the
share price of BT and other companies in the comparator group over
the six months to 31 March prior to the grant of the award.
However, for the awards granted in the financial year 2002/03, the
period was from 19 November 2001 (the date of the O2 demerger) to
31 March 2002. The end price is the average of the share price
over the six months to the end of the performance period, adjusted
for all capital actions and dividend payments that occur during
the performance period.
For the financial year
2005/06, the Committee decided to grant incentive shares and to
increase the annual bonus potential, payable in deferred shares,
instead of the combination of share options and incentive shares
granted in 2004/05. Incentive shares with a maximum value of 100%
of salary were granted. The Committee determined, with advice from
Towers Perrin, that the change of emphasis would increase the proportion
of variable reward linked to annual performance targets. Incentive
share awards remain a significant part of the package and, together
with deferred shares, these modifications further aligned management
with long-term shareholder interests.
Awards
of incentive shares vest after a performance period of three years,
if the participant is still employed by BT and a performance measure
has been met. For awards of incentive shares in the financial years
2004/05 and 2005/06, TSR at the end of the three year period must
be in the upper quartile relative to the comparator group for all
of the shares to vest. At median, 25% of the shares under award
will vest. Below that point, none of the shares under award will
vest. The proportion of shares that vests reduces on a straight-line
basis between those points. There will be no re-testing, and no
matching shares are being offered to any executive on vesting of
the incentive shares.
The
details of incentive share awards held by Ben Verwaayen, Andy Green,
Hanif Lalani, Ian Livingston and Paul Reynolds at the end of the
financial year 2005/06 are contained in the share
awards table.
No share options were
granted in 2005/06.
The
price at which shares may be acquired under the Global Share Option
Plan (GSOP) is the market price at the date of grant. Other than
for new recruits, the size of option grant is based on corporate
and individual performance. Options are exercisable after three
years, subject to a performance target being met. The Committee
would not normally expect the initial value of annual grants of
options, based on the market price of a BT share, to exceed three
times base salary. In the financial year 2004/05, the maximum option
grant for executive directors and OC members was reduced to 1.5
times base salary (see Incentive shares above).
For
options granted subject to a TSR measure, BT’s TSR at the end
of the three-year period must be in the upper quartile for all of
the options to be exercisable. At median, 30% of the options will
be exercisable. Below that point, none of the options may be exercised.
The proportion of options that are exercisable reduces on a straight-line
basis between those points. For options granted in the financial
year 2002/03, if the performance measure is not met in full at the
first measurement, it may be re-tested against a fixed base in years
four and five, and for options granted in the financial year 2003/04,
it may be re-tested in year five. If TSR has not reached the median
at the end of the fifth year, previously unexercisable options will
lapse. For options granted in the financial year 2002/03, TSR had
reached 74th position at the first measurement relative to the FTSE
100, it had reached 73rd position on the second measurement and
performance will be re-tested in the financial year 2006/07. For
options granted in the financial year 2003/04, TSR had reached 85th
position at the first measurement relative to the FTSE 100
and performance will be re-tested in the financial year 2007/08.
If the performance measure is not met, the options will lapse.
For
options granted in the financial year 2004/05 there were no re-testing
provisions, and the policy of the Committee is for there to be no
re-testing for future equity awards.
The
option granted to Sir Christopher Bland on 22 June 2001 as
part of his recruitment package is not subject to a performance
measure as it matched a personal investment in BT shares of £1
million.
The
details of the options held by Sir Christopher Bland, Ben Verwaayen,
Andy Green, Hanif Lalani, Ian Livingston and Paul Reynolds at the
end of the financial year 2005/06 are contained in the share
options table.
Retention shares are granted
under the Retention Share Plan (RSP) to individuals with critical
skills, as a recruitment or retention tool. As a result, shares
currently under award are not generally linked 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 agreed otherwise. The shares are transferred at the end
of the specified period if the individual is still employed by BT.
Retention
shares are used only in exceptional circumstances and, in the financial
year 2005/06, 14 awards were made of which eight awards were
made for recruitment purposes.
In
May 2005, an award of retention shares with an initial market value
of £1 million was granted to Ian Livingston, to help secure
his appointment and long-term retention as Chief Executive, BT Retail.
This award will vest in two tranches in November 2006 and November
2007.
Andy
Green will be granted an award of retention shares in respect of
BT Global Services’ financial performance in 2005/06 under
a special bonus arrangement (see Annual
bonus).
The
awards under the RSP held by Sir Christopher Bland and Ian Livingston
at the end of the financial year 2005/06, or which vested during
the year, are contained in the Vesting of outstanding
share awards table.
The executive directors
and the Chairman may participate in BT’s HM Revenue & Customs
(HMRC) approved all-employee share plans, the Employee Sharesave
Scheme and Employee Share
Investment Plan, on the same basis as other employees. There are
further details of these plans in note 31 to the accounts.
|
(iii)
Annual package – financial year 2006/07
|
The Remuneration Committee
has determined that there will not be any general increase in base
pay for executive directors in the financial year 2006/07. However,
Ben Verwaayen’s base pay, which has not increased since he
joined the company in 2002, will be increased to £750,000
per annum from 1 June 2006. Hanif Lalani’s base pay will be
increased to £460,000 per annum from 1 June 2006, following
his successful assumption of, and continuing performance in, the
Group Finance Director’s role.
In the financial year
2006/07, incentive shares will again be granted for equity participation
on the same terms as incentive shares in 2005/06. TSR will continue
to be measured against a comparator group of companies from the
European Telecom Sector.
The bonus structure remains
unchanged. However, in line with the Committee’s policy progressively
to make a greater part of the remuneration packages variable, on-target
and maximum (requiring exceptional performance) bonus levels for
executive directors as a percentage of salary will be 105% and 192.5%
respectively, with approximately 43% of any bonus payable in deferred
shares. The bonus arrangements for the Chief Executive remain unchanged.
The
annual bonus plan will continue to focus on annual objectives and
to reward the achievement of results against those objectives. Performance
will again be against earnings per share, free cash flow and customer
satisfaction measures and the weighting of those objectives will
be the same as in 2005/06. As in the financial year 2005/06, for
purposes of calculating earnings per share for the scorecard, volatile
items reported under IFRS have been excluded from the target.
Group
performance targets for the financial year 2006/07 are believed
by the Committee to be more challenging than the outturn of the
financial year 2005/06.
|
Proportion
of fixed and variable remuneration
|
The targeted composition
of each executive director’s performance-related remuneration,
excluding pension, for the financial year 2006/07, comprising annual
and long-term incentives, will be:
| |
|
|
Fixed
Base Pay |
|
|
Variable |
|
|
Total |
|
|
|
B.
Verwaayen
|
|
|
25% |
|
|
75% |
|
|
100% |
|
|
A.
Green
|
|
|
40% |
|
|
60% |
|
|
100% |
|
|
H.
Lalani
|
|
|
40% |
|
|
60% |
|
|
100% |
|
|
I.
Livingston
|
|
|
40% |
|
|
60% |
|
|
100% |
|
|
Dr.
P. Reynolds
|
|
|
40% |
|
|
60% |
|
|
100% |
|
|
Total remuneration comprises
base salary, annual bonus – cash and deferred shares –
and the expected value of awards under BT’s long-term incentive
plans, excluding retention shares.
In the Undertakings given
to Ofcom on 22 September 2005, BT agreed that the incentive elements
of the remuneration of executives within Openreach should be linked
to Openreach performance rather than BT targets or share price.
These incentives cannot be provided by way of BT shares.
New
arrangements have been agreed by the Committee and put in place
which will give Openreach executives an opportunity to receive bonuses
and long-term incentive awards of equivalent value to the bonuses
and long-term incentives awarded to other BT executives. Long-term
incentives will, however, be paid in cash instead of BT shares.
For
the financial year 2006/07, the annual bonus will continue to be
linked to an annual scorecard but the scorecard targets will be
those of Openreach alone.
As
required by the Undertakings a cash arrangement is also in place
to enable Openreach executives to exchange, if they wish, in June
2006 their options and awards over BT shares for cash awards.
Openreach
executives will continue to participate in the BT HMRC-approved
all-employee share plans on the same terms as other BT employees.
In addition, there would be no changes to the pension arrangements
of these executives.
None
of the executive directors will participate in the Openreach incentive
plans.
|
Executive
share ownership
|
A mandatory shareholding
programme was introduced for the financial year 2005/06 onwards.
This is to encourage executive directors and certain other executives
to build up a shareholding in the company over time by retaining
shares received either as a result of participating in a BT employee
share plan (other than the shares sold to pay a National Insurance
or income tax liability) or from on-market purchases. The Chief
Executive is required to build up a shareholding of 2 x salary and
the remaining executive directors 1.5 x salary. Given that a large
part of an executive’s remuneration is already variable, the
requirement excludes the need to make a further personal investment
to build up the shareholding should share plan awards not vest.
Current shareholdings are set out on in the Directors'
interests table. Progress towards meeting these targets
has been made during the financial year 2005/06.
Those directors and other
employees, who joined the company prior to 1 April 2001, are members
of the BT Pension Scheme, which is a defined benefit scheme. The
benefits for the three executive directors who are members of the
scheme are set out in the increase in the Accrued
benefits table.
The
Committee reviewed the impact of the Lifetime Allowance under the
pension simplification legislation which came into force from 6
April 2006. As a result, BT offered those members affected the option
to opt out of future accruals of pensionable service and in its
place to receive a cash allowance annually. This was broadly cash
neutral for the company.
BT
closed the BT Pension Scheme to new members from 1 April 2001. From
this date provision is generally made on a defined contribution
basis. The company agrees to pay a fixed percentage of the executive’s
salary each year which can be put towards the provision of retirement
benefits. Additionally, a lump sum equal to four times salary is
payable on death in service. The benefits for the three executive
directors who are covered by this are set out in the Accrued
benefits table.
Pension
provision for all executives is based on salary alone – bonuses,
other elements of pay and long-term incentives are excluded.
Other benefits for the
Chairman and the senior management team include 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. The company
has a permanent health insurance policy to provide cover for the
Chairman and certain executive directors who may become permanently
incapacitated.
It is the policy for the
Chairman and executive directors to have service agreements providing
for one year’s notice. It may be necessary on recruitment to
offer longer initial periods to new directors from outside BT, or
circumstances may make it appropriate to offer a longer fixed term.
All of the service agreements contain provisions dealing with the
removal of a director through poor performance, including in the
event of early termination of the contract by BT. Sir Christopher
Bland’s contract expires at the conclusion of the AGM in 2007.
On termination of his contract by BT before that date, he is entitled
to payment of salary and the value of benefits for the period of
12 months from date of termination, or until the conclusion of the
company’s AGM in 2007 if that period is shorter. Ben Verwaayen’s
contract entitles him on termination of his contract by BT to payment
of £700,000. The contracts of Andy Green, Hanif Lalani, Ian
Livingston and Paul Reynolds entitle them on termination of their
contract by BT to payment of salary and the value of benefits until
the earlier of 12 months from notice of termination or the director
obtaining full-time employment. If the contract of an executive
director (other than that of the Chairman and Hanif Lalani) is terminated
by BT within one year of BT entering into a scheme of arrangement
or becoming a subsidiary of another company, he will be entitled
to receive the higher of that current year’s on-target bonus
or the previous year’s bonus, the market value of shares awarded
under an employee share ownership plan or deferred bonus plan that
have not vested, together with a year’s salary and the value
of any benefits.
The
Committee has reviewed contracts taking into account the joint statement
of best practice on executive contracts and severance by the Association
of British Insurers and the National Association of Pension Funds,
and other relevant guidelines, and believes that contract terms
are generally in line with best practice. The clause described above
dealing with termination following BT entering into a scheme of
arrangement or becoming a subsidiary of another company will be
excluded from contracts for new appointments, as was the case for
Hanif Lalani.
The Committee believes
that there are significant benefits, to both the company and the
individual, from executive directors accepting non-executive directorships
of companies outside BT. The Committee will consider up to two external
appointments (of which only one may be to the Board of a major company),
for which a director may retain the fees. Ben Verwaayen as a non-executive
director of United Parcel Service (UPS), receives an annual fee
of US$75,000. On joining UPS’s Board on 17 March 2005, he received
336 shares of restricted UPS common stock amounting to US$25,000
and a further grant of 1,180 shares of restricted stock on 9 May
2005, amounting to US$85,043. Ian Livingston receives an annual
fee of £38,000 as a non-executive director of Ladbrokes plc
(formerly Hilton Group plc). Paul Reynolds, as a non-executive director
of E-Access in Japan, receives an annual fee of ¥3,204,000 (approximately
£15,600). He was granted an option over 250 shares at ¥76,565
(approximately £367) per share on 1 July 2005. Andy
Green was appointed a non-executive director of NAVTEQ in the US
on 16 March 2006. He is entitled to receive an annual fee of US$40,000,
stock options to the value of US$60,000 and restricted stock units
to the value of US$30,000.
|
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 party can give the other
at least three months’ notice. 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 in the Report of the directors. The letters of appointment
of non-executive directors are terminable on notice by the company
without compensation.
|
Non-executive
directors’ remuneration
|
Eight 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.
The
fees paid to non-executive directors were increased with effect
from 1 January 2004 to reflect their increasing responsibilities
and time commitments.
The
basic fee for non-executive directors is £40,000 per year.
An additional fee for membership of a Board committee is £5,000
per year and a further £5,000 for chairing a committee. Sir
Anthony Greener, Deputy Chairman and senior non-executive director,
who also chairs both the Remuneration Committee and the Audit Committee,
receives total fees of £115,000 per year. In recognition of
the greater commitment required, during the year it was agreed that
Maarten van den Bergh and John Nelson should receive an annual fee
of £5,000 as members of the Pension Scheme Performance Review
Group and Maarten van den Bergh should receive an additional £5,000
per annum as chairman of the Group. Carl Symon receives an annual
fee of £50,000 as chairman of the Equality of Access Board
(a Board committee), which was established on 1 November 2005.
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, £5,000
of BT shares each year. The directors are asked to hold these shares
until they retire from the Board. This policy is not mandatory.
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.
|
Directors’
service agreements and contracts of appointment
|
The dates on which directors’
initial service agreements/letters of appointment commenced and
the current expiry dates are as follows:
|
|
Chairman
and executive directors
|
|
|
Commencement
date |
|
|
Expiry
date of current service agreement or letter of appointment |
|
Sir
Christopher Bland
|
|
|
1
May 2001 |
|
|
Sir
Christopher Bland entered into a new service agreement on
29 August 2003 which terminates at the conclusion of the 2007
AGM, terminable on 12 months’ notice by either the company
or the director before that date. |
|
|
|
|
|
|
|
|
|
B
Verwaayen
A Green
H Lalani
I Livingston
Dr P Reynolds
|
|
|
14
January 2002
19 November 2001
7 February 2005
8 April 2002
19 November 2001 |
 |
|
The
contract is terminable by the company on 12 months’ notice
and by the director on six months’ notice. |
|
|
|
|
|
|
|
|
|
Non-executive
directors
|
|
|
|
|
|
|
|
Sir Anthony Greener
M van den Bergh
C Brendish
Baroness Jay
J Nelson
C G Symon
|
|
|
1 October 2000
1 September 2000
1 September 2002
14 January 2002
14 January 2002
14 January 2002 |
|
|
Letters
of appointment were for an initial period of three years.
Appointments were extended for a further three years and are
terminable by the company or the director on three months’
notice. |
| |
|
|
|
|
|
|
|
L
R Hughes
|
|
|
1
January 2000 |
|
|
Letter
of appointment was for an initial period of three years. The
appointment was extended for a further three years and three
months. Terminated 31 March 2006. |
|
|
|
|
|
|
|
|
|
M
Alahuhta
P Hodkinson
|
|
|
1
February 2006
1 February 2006 |
 |
|
Letters
of appointment are for an initial period of three years and
are terminable by the company or the director on three months’
notice. The appointment is renewable by mutual agreement. |
|
There are no other service
agreements or material contracts, existing or proposed, between
the company and the directors. There are no arrangements or understandings
between any director or executive officer and any other person pursuant
to which any director or executive officer was selected to serve.
There are no family relationships between the directors.
The interests of directors
holding office at the end of the year and their families in the
company’s shares at 31 March 2006 and 1 April 2005, or
date of appointment if later, are shown below:
| |
|
No.
of shares |
|
| |
|
|
|
|
Beneficial
holdings
|
|
|
2006 |
|
|
2005 |
|
|
|
|
Sir
Christopher Blandc
|
|
|
674,257 |
b |
|
674,183 |
b |
|
B
Verwaayenc
|
|
|
951,497 |
|
|
902,001 |
|
|
A
Greenc
|
|
|
152,645 |
b |
|
120,002 |
b |
|
H
Lalanic
|
|
|
14,360 |
ab |
|
5,733 |
b |
|
I
Livingstonc
|
|
|
313,110 |
ab |
|
313,054 |
b |
|
Dr
P Reynoldsc
|
|
|
98,050 |
ab |
|
67,768 |
b |
|
Sir
Anthony Greener
|
|
|
60,007 |
|
|
60,007 |
|
|
M
Alahuhta
|
|
|
20,000 |
|
|
– |
d |
|
M
van den Bergh
|
|
|
12,040 |
|
|
7,540 |
|
|
C
Brendish
|
|
|
30,920 |
|
|
23,920
|
|
|
P
Hodkinson
|
|
|
4,622 |
|
|
– |
d |
|
L
R Hughes
|
|
|
6,800 |
|
|
6,800
|
|
|
Baroness
Jay
|
|
|
8,214 |
e |
|
5,572
|
|
|
J
Nelson
|
|
|
50,000 |
|
|
50,000
|
|
|
C
G Symon
|
|
|
15,069 |
|
|
10,069
|
|
|
|
|
Total
|
|
|
2,411,591 |
|
|
2,246,649 |
|
|
|
| a |
During
the period from 1 April 2006 to 15 May 2006, Paul Reynolds
and Hanif Lalani each purchased 692 shares and Ian Livingston
purchased 1,394 shares under the BT Group Employee Share
Investment Plan.
|
| b |
Includes
free shares awarded under the Employee Share Investment
Plan.
|
| c |
At
31 March 2006, Sir Christopher Bland and each of the executive
directors, as potential beneficiaries, had a non-beneficial
interest in 24,809,976 shares (2005 – 27,733,138) held
in trust by Ilford Trustees (Jersey) Limited for allocation
to employees under the employee share schemes. They each
also had a non-beneficial interest in 50,342 shares (2005
– 139,029) held in trust by Halifax Corporate Trustees
Limited for participants in the Employee Share Investment
Plan.
|
| d |
Matti
Alahuhta and Phil Hodkinson joined the Board on 1 February
2006.
|
| e |
On
2 May 2006, Baroness Jay inherited 261 shares.
|
The directors, as a group, beneficially own less than 1% of the
company’s ordinary shares.
This graph illustrates,
as required by the Companies Act 1985, the performance of BT Group
plc measured by TSR (adjusted for the rights issue and the demerger
of BT’s mobile business in the financial year 2001/02) relative
to a broad equity market index over the past five years. We consider
the FTSE 100 to be the most appropriate index against which to measure
performance for these purposes, as BT has been a constituent of
the FTSE 100 throughout the five-year period and the index is widely
used. TSR is the measure of the returns that a company has provided
for its shareholders, reflecting share price movements and assuming
reinvestment of dividends.
REMUNERATION
REVIEW
This
part of the Report on directors’ remuneration is subject to
audit.
Directors’
emoluments
Directors’ emoluments
for the financial year 2005/06 were as follows:
| |
Basic
salary and
fees |
|
|
Pension
allowance net
of pension
contributions |
a |
|
Total
salary and
fees |
|
|
Annual
cash bonus |
|
|
Expenses
allowance |
|
|
Other
benefits
excluding pension |
|
|
Total
2006 |
|
|
Total
2005 |
|
Deferred
Bonus Plan |
e |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
|
| |
£000 |
|
|
£000 |
|
|
£000 |
|
|
£000 |
|
|
£000 |
|
|
£000 |
|
|
£000 |
|
|
£000 |
|
|
£000 |
|
|
£000 |
|
|
|
| Sir
Christopher Blandc |
500 |
|
|
– |
|
|
500 |
|
|
– |
|
|
– |
|
|
32 |
|
|
532 |
|
|
532 |
|
|
– |
|
|
– |
|
| B
Verwaayenbc |
700 |
|
|
178 |
|
|
878 |
|
|
784 |
|
|
– |
|
|
32 |
|
|
1,694 |
|
|
1,512 |
|
|
1,316 |
|
|
224 |
|
| A
Greenc |
500 |
|
|
– |
|
|
500 |
|
|
400 |
|
|
– |
|
|
30 |
|
|
930 |
|
|
684 |
|
|
300 |
|
|
102 |
|
| H
Lalanicd |
400 |
|
|
– |
|
|
400 |
|
|
320 |
|
|
– |
|
|
39 |
|
|
759 |
|
|
207 |
|
|
240 |
|
|
68 |
|
| I
Livingstonbc |
525 |
|
|
136 |
|
|
661 |
|
|
420 |
|
|
19 |
|
|
10 |
|
|
1,110 |
|
|
816 |
|
|
315 |
|
|
99 |
|
| Dr
P Reynoldsbcf |
433 |
|
|
– |
|
|
433 |
|
|
360 |
|
|
19 |
|
|
22 |
|
|
834 |
|
|
653 |
|
|
270 |
|
|
107 |
|
| Sir
Anthony Greener |
115 |
|
|
– |
|
|
115 |
|
|
– |
|
|
– |
|
|
– |
|
|
115 |
|
|
115 |
|
|
– |
|
|
– |
|
| M
Alahuhta |
8 |
|
|
– |
|
|
8 |
|
|
– |
|
|
– |
|
|
– |
|
|
8 |
|
|
– |
|
|
– |
|
|
– |
|
| M
van den Bergh |
59 |
|
|
– |
|
|
59 |
|
|
– |
|
|
– |
|
|
– |
|
|
59 |
|
|
55 |
|
|
– |
|
|
– |
|
| C
Brendish |
50 |
|
|
– |
|
|
50 |
|
|
– |
|
|
– |
|
|
– |
|
|
50 |
|
|
50 |
|
|
– |
|
|
– |
|
| P
Hodkinson |
8 |
|
|
– |
|
|
8 |
|
|
– |
|
|
– |
|
|
– |
|
|
8 |
|
|
– |
|
|
– |
|
|
– |
|
| L
R Hughes |
38 |
|
|
– |
|
|
38 |
|
|
– |
|
|
– |
|
|
– |
|
|
38 |
|
|
21 |
|
|
– |
|
|
– |
|
| Baroness
Jay |
50 |
|
|
– |
|
|
50 |
|
|
– |
|
|
– |
|
|
– |
|
|
50 |
|
|
50 |
|
|
– |
|
|
– |
|
| J
Nelson |
52 |
|
|
– |
|
|
52 |
|
|
– |
|
|
– |
|
|
– |
|
|
52 |
|
|
50 |
|
|
– |
|
|
– |
|
| C
G Symon |
87 |
|
|
– |
|
|
87 |
|
|
– |
|
|
– |
|
|
– |
|
|
87 |
|
|
50 |
|
|
– |
|
|
– |
|
|
|
| |
3,525 |
|
|
314 |
|
|
3,839 |
|
|
2,284 |
|
|
38 |
|
|
165 |
|
|
6,326 |
|
|
4,795 |
|
|
|
|
|
|
|
|
|
| a |
Balance
or part of the pension allowance for the financial year
2005/06 – see ‘Pensions’ below. Retirement
benefits are accruing to three directors under defined contribution
arrangements and to three directors and one former director
under defined benefit arrangements.
|
| b |
Expenses
allowance in the above table includes a monthly cash allowance
in lieu of a company car equivalent to £18,500 received
by Ian Livingston and Paul Reynolds.
Ben Verwaayen was entitled to an annual housing allowance
of £250,000 until 13 January 2005. In the financial
year 2004/05, £196,000 was paid in respect of that
year.
|
| c |
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 had an interest free loan –
see ‘Loans’ below.
|
| d |
Hanif
Lalani joined the Board on 7 February 2005.
|
| e |
Deferred
annual bonuses payable in shares in three years’ time,
subject to continued employment.
|
| f |
Paul
Reynolds sacrificed £225,000 of his total bonus of
£360,000 and the company paid an equivalent amount
into the BT Pension Scheme to provide him with additional
benefits on a defined contribution basis.
|
The annual salaries
of the Chairman, Ben Verwaayen, Andy Green, Ian Livingston and
Hanif Lalani remained unchanged during the financial year 2005/06.
On 1 August 2005, the annual salary of Paul Reynolds was increased
from £400,000 to £450,000. Following this year’s
salary review, the Committee decided that there should be no general
increase from 1 June 2006 in basic salaries, save that Ben Verwaayen’s
annual salary will be increased from £700,000 to £750,000
and Hanif Lalani’s annual salary will be increased from £400,000
to £460,000, both on 1 June 2006.
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.
Annual
cash bonus awards in respect of the financial year 2005/06, which
are not pensionable, to executive directors ranged from 80% to
112% of current salary (2005 – 38% to 64%).
Sir Peter Bonfield received,
under pre-existing arrangements, a pension of £352,153 payable
in the financial year 2005/06 (2004/05 – £340,000).
Prior to the date of his
appointment to the Board on 19 November 2001, Paul Reynolds
had an interest-free loan of £300,000 from the company to
assist with relocation. At 31 March 2006, he owed £200,000
(2005 – £230,000). During the financial year 2005/06,
the maximum amount outstanding was £230,000. 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. The outstanding amount of a loan of £209,374
granted to a former director, Pierre Danon, was repaid during the
year.
|
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 £10,560 were payable in respect
of the financial year 2005/06. 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. The company paid £31,680
into his personal pension plan, the maximum permitted by HMRC, plus
a cash payment of £178,320 representing the balance of the
pension allowance for the financial year 2005/06. 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 £21,120
into his personal pension plan, the maximum permitted by HMRC, plus
a cash payment of £136,380 representing the balance of the
pension allowance for the financial year 2005/06. 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 27 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. He chose to opt out of future accrual of pensionable
service from 1 April 2006 and, in its place, to receive a cash allowance
of 30% of salary.
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. He chose to opt out of future accrual of pensionable
service from 1 April 2006 and, in its place, to receive a cash allowance
of 30% of salary.
The table below shows the increase in the
accrued benefits, including those referred to above, to which each
director, who is a member of the BT Pension Scheme, has become entitled
during the year and the transfer value of the increase in accrued
benefits:
| |
|
Accrued
pension
|
|
Transfer
value of 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
|
|
| |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2006 |
|
|
2006 |
|
| |
|
|
£000 |
a |
|
£000 |
b |
|
£000 |
c |
|
£000 |
d |
|
£000 |
|
|
£000 |
e |
|
£000 |
f |
|
|
|
A
Green
|
|
|
157 |
|
|
131 |
|
|
2,448 |
|
|
1,848 |
|
|
570 |
|
|
23 |
|
|
331 |
|
|
H
Lalanih
|
|
|
112 |
|
|
73 |
|
|
1,144 |
|
|
668 |
|
|
452 |
|
|
38 |
|
|
362 |
|
|
Dr.
P Reynolds
|
|
|
140 |
|
|
123 |
|
|
1,995 |
|
|
1,578 |
|
|
391 |
|
|
14 |
|
|
178 |
|
|
|
| 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 2006 and 2005, respectively.
|
| c |
Transfer
value of the deferred pension in column (a) as at 31 March
2006 calculated on the basis of actuarial advice in accordance
with Actuarial Guidance Note GN11. The transfer value represents
a liability of the BT Pension Scheme 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
2005 on the assumption that the director left service at
that date.
|
| e |
The
increase in pension built up during the year, net of inflation.
The gross amount can be calculated by deducting the amount
under column (b) from the amount under column (a).
|
| f |
The
transfer value of the pension in column (e), less directors’
contributions.
|
| g |
Directors’
contributions in the financial year 2005/06 were as follows:
Andy Green, £30,000.
(2005 – £26,625); Hanif Lalani £24,000
(2005 – £16,300) and Paul Reynolds, £26,000
(2005 – £24,000).
|
| h |
Hanif
Lalani joined the Board on 7 February 2005.
|
Share
options held at 31 March 2006
|
| |
|
Number
of shares under option
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
1
April 2005 |
|
|
Granted
|
|
|
Lapsed |
|
|
31
March 2006 |
|
|
Option
price per share |
|
|
Usual
date from which exercisable |
|
|
Usual
expiry date |
|
|
|
|
Sir
Christopher Bland
|
|
|
314,244 |
a |
|
– |
|
|
– |
|
|
314,244 |
|
|
318p |
|
|
01/05/2004 |
|
|
01/05/2011 |
|
|
|
|
B
Verwaayen
|
|
|
1,121,121 |
b |
|
– |
|
|
– |
|
|
1,121,121 |
|
|
250p |
|
|
01/04/2005 |
|
|
11/02/2012 |
|
| |
|
|
935,830 |
c |
|
– |
|
|
– |
|
|
935,830 |
|
|
187p |
|
|
29/07/2005 |
|
|
29/07/2012 |
|
| |
|
|
1,052,632 |
d |
|
– |
|
|
– |
|
|
1,052,632 |
|
|
199.5p |
|
|
24/06/2006 |
|
|
24/06/2013 |
|
| |
|
|
546,875 |
e |
|
– |
|
|
– |
|
|
546,875 |
|
|
192p |
|
|
24/06/2007 |
|
|
24/06/2014 |
|
|
|
| |
|
|
3,656,458 |
|
|
– |
|
|
– |
|
|
3,656,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
A
Green
|
|
|
568,190 |
c |
|
– |
|
|
– |
|
|
568,190 |
|
|
187p |
|
|
29/07/2005 |
|
|
29/07/2012 |
|
| |
|
|
639,098 |
d |
|
– |
|
|
– |
|
|
639,098 |
|
|
199.5p |
|
|
24/06/2006 |
|
|
24/06/2013 |
|
| |
|
|
332,032 |
e |
|
– |
|
|
– |
|
|
332,032 |
|
|
192p |
|
|
24/06/2007 |
|
|
24/06/2014 |
|
| |
|
|
5,712 |
f |
|
– |
|
|
– |
|
|
5,712 |
|
|
165p |
|
|
14/08/2007 |
|
|
13/02/2008 |
|
|
|
| |
|
|
1,545,032 |
|
|
– |
|
|
– |
|
|
1,545,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
H
Lalani
|
|
|
177,810 |
c |
|
– |
|
|
– |
|
|
177,810 |
|
|
187p |
|
|
29/07/2005 |
|
|
29/07/2012 |
|
| |
|
|
210,527 |
d |
|
– |
|
|
– |
|
|
210,527 |
|
|
199.5p |
|
|
24/06/2006 |
|
|
24/06/2013 |
|
| |
|
|
156,250 |
e |
|
– |
|
|
– |
|
|
156,250 |
|
|
192p |
|
|
24/06/2007 |
|
|
24/06/2014 |
|
| |
|
|
5,346 |
g |
|
– |
|
|
– |
|
|
5,346 |
|
|
173p |
|
|
14/08/2006 |
|
|
13/02/2007 |
|
| |
|
|
105,264 |
h |
|
– |
|
|
– |
|
|
105,264 |
|
|
199.5p |
|
|
24/06/2004 |
|
|
24/06/2013 |
|
|
|
| |
|
|
655,197 |
|
|
– |
|
|
– |
|
|
655,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
I
Livingston
|
|
|
601,610 |
c |
|
– |
|
|
– |
|
|
601,610 |
|
|
187p |
|
|
29/07/2005 |
|
|
29/07/2012 |
|
| |
|
|
676,692 |
d |
|
– |
|
|
– |
|
|
676,692 |
|
|
199.5p |
|
|
24/06/2006 |
|
|
24/06/2013 |
|
| |
|
|
351,563 |
e |
|
– |
|
|
– |
|
|
351,563 |
|
|
192p |
|
|
24/06/2007 |
|
|
24/06/2014 |
|
| |
|
|
7,290 |
i |
|
– |
|
|
– |
|
|
7,290 |
|
|
227p |
|
|
14/08/2007 |
|
|
13/02/2008 |
|
|
|
| |
|
|
1,637,155 |
|
|
– |
|
|
– |
|
|
1,637,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr
P Reynolds
|
|
|
534,760 |
c |
|
– |
|
|
– |
|
|
534,760 |
|
|
187p |
|
|
29/07/2005 |
|
|
29/07/2012 |
|
| |
|
|
601,504 |
d |
|
– |
|
|
– |
|
|
601,504 |
|
|
199.5p |
|
|
24/06/2006 |
|
|
24/06/2013 |
|
| |
|
|
312,500 |
e |
|
– |
|
|
– |
|
|
312,500 |
|
|
192p |
|
|
24/06/2007 |
|
|
24/06/2014 |
|
| |
|
|
4,555 |
j |
|
– |
|
|
– |
|
|
4,555 |
|
|
218p |
|
|
14/02/2007 |
|
|
13/08/2007 |
|
|
|
| |
|
|
1,453,319 |
|
|
– |
|
|
– |
|
|
1,453,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,261,405 |
|
|
– |
|
|
– |
|
|
9,261,405 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
All
of the above options were granted for nil consideration.
No options were exercised during the year.
|
| a |
Options
granted under the GSOP on 22 June 2001. The option is not
subject to a performance measure. It was a term of Sir Christopher
Bland’s initial service contract that (i) he purchased
BT shares to the value of at least £1 million; and
(ii) as soon as practicable after the purchase of the shares
(‘invested shares’), the company would grant a
share option over shares to the value of at least £1
million. Sir Christopher Bland was the legal and beneficial
owner of the invested shares on 1 May 2004, so the option
became exercisable on that date.
|
| b |
Option
granted under the GSOP on 11 February 2002. The exercise
of the option is subject to a performance measure being
met. The performance measure is relative TSR compared with
the FTSE 100 as at 1 April 2002. BT’s TSR must be in
the upper quartile for all of the option to become exercisable.
At median, 40% of the option will be exercisable. Below
that point, none of the option may be exercised. On 31 March
2005, BT’s TSR was at 74th position against the FTSE
100 and on 31 March 2006, BT’s TSR was at 73rd position
against the FTSE 100. As a result, the option did not become
exercisable. The TSR will be re-tested against a fixed base
on 31 March 2007.
|
| c |
Options
granted under the GSOP on 29 July 2002. The exercise of
options is subject to a performance measure being met. The
performance measure is relative TSR compared with the FTSE
100 as at 1 April 2002. BT’s TSR must be in the upper
quartile for all of the options to become exercisable. At
median, 30% of the options will be exercisable. Below that
point, none of the options may be exercised. On 31 March
2005, BT’s TSR was at 74th position against the FTSE
100 and on 31 March 2006, BT’s TSR was at 73rd position
against the FTSE 100. As a result, the options did not become
exercisable. The TSR will be re-tested against a fixed base
on 31 March 2007.
|
| d |
Options
granted under the GSOP on 24 June 2003. The exercise of
options is subject to a performance measure being met. The
performance measure is relative TSR compared with the FTSE
100 as at 1 April 2003. BT’s TSR must be in the upper
quartile for all of the options to become exercisable. At
median, 30% of the options will be exercisable. Below that
point, none of the options may be exercised. On 31 March
2006, BT’s TSR was at 85th position against the FTSE
100. As a result, the options did not become exercisable.
The TSR will be re-tested against a fixed base on 31 March
2008.
|
| e |
Options
granted under the GSOP on 24 June 2004. The exercise of
options is subject to a performance measure being met. The
performance measure is relative TSR compared with a group
of companies from the European Telecom Sector as at 1 April
2004. BT’s TSR must be in the upper quartile for all
the options to become exercisable. At median 30% of the
options will be exercisable. Below that point none of the
options may be exercised.
|
| f |
Option
granted on 25 June 2004 under the Employee Sharesave Scheme,
in which all employees of the company are eligible to participate.
|
| g |
Option
granted on 27 June 2003 under the Employee Sharesave Scheme,
in which all employees of the company are eligible to participate.
|
| h |
Option
granted under the GSOP (Special Incentive Award) on 24 June
2003, prior to Mr Lalani’s appointment as a director.
This option is not subject to a performance measure as the
grant was linked to personal performance.
|
| i |
Option
granted on 25 June 2002 under the Employee Sharesave Scheme,
in which all employees of the company are eligible to participate.
|
| j |
Option
granted on 21 December 2001 under the Employee Sharesave
Scheme, in which all employees of the company are eligible
to participate.
|
The market price of a share at 31 March 2006 was 222p (2005 –
205.5p) and the range during the financial year 2005/06 was 196.5p
– 235p.
From
31 March 2006, two thirds of Hanif Lalani’s option granted
on 24 June 2003 was exercisable giving an unrealised gain as at
that date of £15,790. There were no further unrealised gains
on the above share options at 31 March 2006 (2005 – £2,105),
based on the market price of the shares on 31 March 2006.
Share
awards under long-term incentive plans held at 31 March
2006
|
Details of the company’s
ordinary shares provisionally awarded to directors, as participants
under the ISP and RSP are as follows:
| |
|
|
1
April 2005 |
|
|
Awarded |
a |
|
Dividends
re-invested |
|
|
Vested |
e |
|
Lapsed |
|
|
Total
number of award shares 31 March 2006 |
|
|
Expected vesting date
|
|
|
Price
on grant |
|
|
Market
price at vesting |
|
|
Monetary
value of vested
award
£000 |
|
|
Sir
Christopher Bland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSP
2003
|
|
|
299,753 |
|
|
– |
|
|
15,032 |
|
|
– |
|
|
– |
|
|
314,785 |
|
|
2007 |
f
|
|
182p |
|
|
|
|
|
|
|
|
B
Verwaayen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISP
2004
|
|
|
252,798 |
|
|
– |
|
|
12,677 |
|
|
– |
|
|
– |
|
|
265,475 |
|
|
31/03/07 |
|
|
193.42p |
|
|
|
|
|
|
|
ISP
2005
|
|
|
– |
|
|
307,354 |
|
|
15,413 |
|
|
– |
|
|
– |
|
|
322,767 |
|
|
31/03/08 |
|
|
227.75p |
|
|
|
|
|
|
|
|
A
Green
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISP
2004
|
|
|
153,484 |
|
|
– |
|
|
7,696 |
|
|
– |
|
|
– |
|
|
161,180 |
|
|
31/03/07 |
|
|
193.42p |
|
|
|
|
|
|
|
ISP
2005
|
|
|
– |
|
|
219,538 |
|
|
11,008 |
|
|
– |
|
|
– |
|
|
230,546 |
|
|
31/03/08 |
|
|
227.75p |
|
|
|
|
|
|
|
|
H
Lalani
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISP
2004
|
|
|
72,224 |
|
|
– |
|
|
3,621 |
|
|
– |
|
|
– |
|
|
75,845 |
|
|
31/03/07 |
|
|
193.42p |
|
|
|
|
|
|
|
ISP
2005
|
|
|
– |
|
|
175,631 |
|
|
8,807 |
|
|
– |
|
|
– |
|
|
184,438 |
|
|
31/03/08 |
|
|
227.75p |
|
|
|
|
|
|
|
|
I
Livingston
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISP
2004
|
|
|
162,512 |
|
|
– |
|
|
8,149 |
|
|
– |
|
|
– |
|
|
170,661 |
|
|
31/03/07 |
|
|
193.42p |
|
|
|
|
|
|
|
ISP
2005
|
|
|
– |
|
|
230,515 |
|
|
11,559 |
|
|
– |
|
|
– |
|
|
242,074 |
|
|
31/03/08 |
|
|
227.75p |
|
|
|
|
|
|
|
RSP
2002b
|
|
|
183,698 |
|
|
– |
|
|
– |
|
|
183,698 |
|
|
– |
|
|
– |
|
|
20/05/05 |
|
|
273.5p |
|
|
212.25p |
|
|
390 |
|
RSP
2002c
|
|
|
123,307 |
|
|
– |
|
|
– |
|
|
123,307 |
|
|
– |
|
|
– |
|
|
20/05/05 |
|
|
202.0p |
|
|
212.25p |
|
|
262 |
|
RSP
2005d
|
|
|
– |
|
|
511,169 |
|
|
25,634 |
|
|
– |
|
|
– |
|
|
536,803 |
|
|
09/11/07 |
|
|
213.25p |
|
|
|
|
|
|
|
|
Dr
P Reynolds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISP
2004
|
|
|
144,456 |
|
|
– |
|
|
7,244 |
|
|
– |
|
|
– |
|
|
151,700 |
|
|
31/03/07 |
|
|
193.42p |
|
|
|
|
|
|
|
ISP
2005
|
|
|
– |
|
|
175,631 |
|
|
8,807 |
|
|
– |
|
|
– |
|
|
184,438 |
|
|
31/03/08 |
|
|
227.75p |
|
|
|
|
|
|
|
| |
The
number of shares subject to awards granted during the financial
year 2005/06 was calculated using the average middle market
price of a BT share for the three days prior to the grant.
|
| a |
Awards
under the ISP were granted on 3 August 2005. The awards
will vest, subject to meeting a performance target, on 31
March 2008. The performance target is relative TSR compared
with a group of companies from the European Telecom Sector.
BT’s TSR must be in the upper quartile for all of the
awards to vest. At median, 25% of the shares will vest.
Below that point, none of the shares will vest.
|
| b |
In
accordance with his service agreement, an award of 493,601
shares with an initial value of £1,350,000 was granted
on 30 May 2002 to Ian Livingston under the RSP. This award
vested in three equal tranches on the first three anniversaries
of his joining BT.
|
| c |
Ian
Livingston purchased BT shares with a value of £300,000
on 20 May 2002 and was granted an award on that date under
the RSP with a value of £300,000, which vested on
the third anniversary of the date of purchase of his purchased
shares.
|
| d |
Ian
Livingston was granted an award under the RSP on 31 May
2005. The award will vest in two tranches, 50% on 10 November
2006 and 50% on 9 November 2007.
|
| e |
Vesting
of RSP awards is not subject to a performance target being
met.
|
| f |
The
award under the RSP granted to Sir Christopher Bland on
1 September 2003 will vest, subject to continued employment,
at the conclusion of the 2007 AGM.
|
Vesting
of outstanding share awards and options
|
Details of options granted
under the GSOP in the financial years 2002/03 and 2003/04, which
would vest based on BT Group’s TSR compared with the other
companies in the FTSE 100 for the relevant performance periods up
to 31 March 2006, and details of options granted under the GSOP
in the financial year 2004/05 and awards of shares under the ISP
in the financial years 2004/05 and 2005/06, which would vest based
on BT Group’s TSR compared with a group of companies from the
European Telecom Sector for the relevant performance periods up
to 31 March 2006, are as follows:
| |
|
|
|
|
31
March 2006
|
|
31
March 2005
|
|
| |
|
|
Expected
vesting date |
|
|
TSR
position |
|
|
Percentage
of shares vesting |
|
|
TSR
position |
|
|
Percentage
of shares vesting |
|
|
|
|
GSOP
2002a
|
|
|
29/07/05 |
|
|
73 |
|
|
– |
|
|
74 |
|
|
– |
|
|
GSOP
2003
|
|
|
24/06/06 |
|
|
85 |
|
|
– |
|
|
84 |
|
|
– |
|
|
GSOP
2004
|
|
|
24/06/07 |
|
|
9 |
|
|
44% |
|
|
11 |
|
|
– |
|
|
ISP
2004
|
|
|
31/03/07 |
|
|
9 |
|
|
40% |
|
|
11 |
|
|
– |
|
|
ISP
2005
|
|
|
31/03/08 |
|
|
8 |
|
|
55% |
|
|
– |
|
|
– |
|
|
|
Deferred
Bonus Plan awards at 31 March 2006
|
The following deferred
bonuses have been awarded to the directors under the Deferred Bonus
Plan. These shares will normally be transferred to participants
at the end of the three-year deferred period if those participants
are still employed by BT Group.
| |
|
|
1
April 2005 |
|
|
Awardeda |
|
|
Vestedb |
|
|
Dividends
re-invested |
|
|
Lapsed |
|
|
Total
number
of award
shares
31 March
2006 |
|
|
Expected
vesting date |
|
|
Price
at grant |
|
|
Market
price at vesting |
|
|
Monetary
value of vested award
£000 |
|
|
B
Verwaayen
|
|
|
84,009 |
|
|
– |
|
|
84,009 |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
202.0 |
p |
|
225.5 |
p |
|
189 |
| |
|
|
464,390 |
|
|
– |
|
|
– |
|
|
23,289 |
|
|
– |
|
|
487,679 |
|
|
01/08/06 |
|
|
199.5 |
p |
|
– |
|
|
– |
| |
|
|
232,625 |
|
|
– |
|
|
– |
|
|
11,665 |
|
|
– |
|
|
244,290 |
|
|
01/08/07 |
|
|
193.42 |
p |
|
– |
|
|
– |
| |
|
|
– |
|
|
98,461 |
|
|
– |
|
|
4,937 |
|
|
– |
|
|
103,398 |
|
|
01/08/08 |
|
|
227.75 |
p |
|
– |
|
|
– |
|
|
A
Green
|
|
|
55,268 |
|
|
– |
|
|
55,268 |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
202.0 |
p |
|
225.5 |
p |
|
125 |
| |
|
|
83,799 |
|
|
– |
|
|
– |
|
|
4,202 |
|
|
– |
|
|
88,001 |
|
|
01/08/06 |
|
|
199.5 |
p |
|
– |
|
|
– |
| |
|
|
91,087 |
|
|
– |
|
|
– |
|
|
4,567 |
|
|
– |
|
|
95,654 |
|
|
01/08/07 |
|
|
193.42 |
p |
|
– |
|
|
– |
| |
|
|
– |
|
|
44,731 |
|
|
– |
|
|
2,243 |
|
|
– |
|
|
46,974 |
|
|
01/08/08 |
|
|
227.75 |
p |
|
– |
|
|
– |
|
|
H
Lalani
|
|
|
12,985 |
|
|
– |
|
|
12,985 |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
202.0 |
p |
|
225.5 |
p |
|
29 |
| |
|
|
26,396 |
|
|
– |
|
|
– |
|
|
1,322 |
|
|
– |
|
|
27,718 |
|
|
01/08/06 |
|
|
199.5 |
p |
|
– |
|
|
– |
| |
|
|
27,339 |
|
|
– |
|
|
– |
|
|
1,370 |
|
|
– |
|
|
28,709 |
|
|
01/08/07 |
|
|
193.42 |
p |
|
– |
|
|
– |
| |
|
|
– |
|
|
29,957 |
|
|
– |
|
|
1,502 |
|
|
– |
|
|
31,459 |
|
|
01/08/08 |
|
|
227.75 |
p |
|
– |
|
|
– |
|
|
I
Livingston
|
|
|
92,291 |
|
|
– |
|
|
– |
|
|
4,627 |
|
|
– |
|
|
96,918 |
|
|
01/08/06 |
|
|
199.5 |
p |
|
– |
|
|
– |
| |
|
|
87,967 |
|
|
– |
|
|
– |
|
|
4,411 |
|
|
– |
|
|
92,378 |
|
|
01/08/07 |
|
|
193.42 |
p |
|
– |
|
|
– |
| |
|
|
– |
|
|
43,440 |
|
|
– |
|
|
2,177 |
|
|
– |
|
|
45,617 |
|
|
01/08/08 |
|
|
227.75 |
p |
|
– |
|
|
– |
|
|
Dr
P Reynolds
|
|
|
49,740 |
|
|
– |
|
|
49,740 |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
202.0 |
p |
|
225.5 |
p |
|
112 |
| |
|
|
78,868 |
|
|
– |
|
|
– |
|
|
3,954 |
|
|
– |
|
|
82,822 |
|
|
01/08/06 |
|
|
199.5 |
p |
|
– |
|
|
– |
| |
|
|
79,985 |
|
|
– |
|
|
– |
|
|
4,010 |
|
|
– |
|
|
83,995 |
|
|
01/08/07 |
|
|
193.42 |
p |
|
– |
|
|
– |
| |
|
|
– |
|
|
46,774 |
|
|
– |
|
|
2,345 |
|
|
– |
|
|
49,119 |
|
|
01/08/08 |
|
|
227.75 |
p |
|
– |
|
|
– |
|
| |
The
number of shares subject to awards granted during the financial
year 2005/06 was calculated using the average middle market
price of a BT share for the three days prior to the grant.
|
| a |
Awards
granted on 3 August 2005 in respect of the financial year
2004/05.
|
| b |
Awards
granted on 24 June 2002 vested on 1 August 2005.
|
| |
Details
of deferred bonus awards in respect of the financial year
2005/06 are given in the Directors'
emoluments table. Awards in respect of the deferred
bonuses will be granted in June 2006. The number of shares
subject to the awards will be calculated using the average
middle market price of a BT share for the three days prior
to the grant.
|
|
Share
awards under the Employee Share Investment Plan (ESIP) at
31 March 2006
|
| |
|
|
1
April 2005 |
|
|
Awarded |
|
|
Vested |
|
|
Total
number of award shares 31 March 2006 |
|
|
Expected
vesting date
|
|
|
| Sir
Christopher Bland |
|
|
|
|
|
|
|
|
|
|
|
ESIP
2003
|
|
|
186 |
|
|
– |
|
|
– |
|
|
186 |
|
|
05/08/08 |
|
|
ESIP
2004
|
|
|
116 |
|
|
– |
|
|
– |
|
|
116 |
|
|
04/08/09 |
|
|
ESIP
2005
|
|
|
– |
|
|
56 |
a |
|
– |
|
|
56 |
|
|
27/06/10 |
|
|
|
| |
|
|
302 |
|
|
56 |
|
|
|
|
|
358 |
|
|
|
|
|
|
|
A
Green
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESIP
2002
|
|
|
130 |
|
|
– |
|
|
– |
|
|
130 |
|
|
14/08/07 |
|
|
ESIP
2003
|
|
|
186 |
|
|
– |
|
|
– |
|
|
186 |
|
|
05/08/08 |
|
|
ESIP
2004
|
|
|
116 |
|
|
– |
|
|
– |
|
|
116 |
|
|
04/08/09 |
|
|
ESIP
2005
|
|
|
– |
|
|
56 |
a |
|
– |
|
|
56 |
|
|
27/06/10 |
|
|
|
| |
|
|
432 |
|
|
56 |
|
|
– |
|
|
488 |
|
|
|
|
|
|
|
H
Lalani
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESIP
2002
|
|
|
130 |
|
|
– |
|
|
– |
|
|
130 |
|
|
14/08/07 |
|
|
ESIP
2003
|
|
|
186 |
|
|
– |
|
|
– |
|
|
186 |
|
|
05/08/08 |
|
|
ESIP
2004
|
|
|
116 |
|
|
– |
|
|
– |
|
|
116 |
|
|
04/08/09 |
|
|
ESIP
2005
|
|
|
– |
|
|
56 |
a |
|
– |
|
|
56 |
|
|
27/06/10 |
|
|
|
| |
|
|
432 |
|
|
56 |
|
|
– |
|
|
488 |
|
|
|
|
|
|
|
I
Livingston
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESIP
2004
|
|
|
116 |
|
|
– |
|
|
– |
|
|
116 |
|
|
04/08/09 |
|
|
ESIP
2005
|
|
|
– |
|
|
56 |
a |
|
– |
|
|
56 |
|
|
27/06/10 |
|
|
|
| |
|
|
116 |
|
|
56 |
|
|
– |
|
|
172 |
|
|
|
|
|
|
|
P
Reynolds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESIP
2002
|
|
|
130 |
|
|
– |
|
|
– |
|
|
130 |
|
|
14/08/07 |
|
|
ESIP
2003
|
|
|
186 |
|
|
– |
|
|
– |
|
|
186 |
|
|
05/08/08 |
|
|
ESIP
2004
|
|
|
116 |
|
|
– |
|
|
– |
|
|
116 |
|
|
04/08/09 |
|
|
ESIP
2005
|
|
|
– |
|
|
56 |
a |
|
– |
|
|
56 |
|
|
27/06/10 |
|
|
|
| |
|
|
432 |
|
|
56 |
|
|
– |
|
|
488 |
|
|
|
|
|
|
| a |
Awards
granted on 27 June 2005. On that date, the market price
of a BT share was 220p.
|
Operating Committee
The one member of the
Operating Committee (OC) who was not a member of the Board, left
the company on 30 September 2005. The remuneration of that OC member
for the financial year 2005/06 was £148,000 (2004/05 –
£296,000), together with pension contributions of £17,000
(2004/05 – £34,000). No options or awards under the BT
Group plans were granted to the OC member during the financial year
2005/06. The company met its contractual obligations in connection
with the leaving arrangements and a number of outstanding options
and share awards of the OC member were preserved under the terms
of the relevant plans.
By order of the Board
Sir
Anthony Greener
Deputy Chairman and Chairman of Remuneration Committee 17 May
2006
|
