BT announces remuneration package for new CEO

DC13-328 September 20, 2013

BT announces remuneration package for new CEO

Greater focus on reward for long-term performance

BT today announced that Gavin Patterson, the new CEO of BT Group, will receive a base salary of £925,000. This is the same as that received by his predecessor Ian Livingston. This salary continues to be positioned in the lower half of the pay range for CEOs of companies of a similar size and complexity.

The structure of the CEO's bonus is to change however, in line with market trends and following consultation with investors on how to ensure continued focus on long-term delivery. The maximum bonus based on one year's performance is to be substantially reduced, with a corresponding increase in the potential maximum reward for meeting challenging targets over three years.

Under the new structure, the cash and deferred shares bonus for a year's on target' performance is to be reduced from 250 per cent of base salary to 120 per cent. The maximum bonus for a year's performance deemed as stretch' is also to be reduced from a potential maximum of 400 per cent of salary to 240 per cent.

The potential long-term reward for successful performance is to be increased, with the Incentive Share Plan (ISP) reward rising from 63 per cent of salary to 100 per cent for an on target' performance and the maximum potential reward for stretch' rising from 250 per cent of salary to 400 per cent.

BT's ISPs have paid out in full only twice, reflecting the fact they are based on very stretching performance measures. The 2006, 2007 and 2008 ISPs did not pay out at all and the average vesting has been 37.5% over the past six years. The 2011, 2012 and 2013 ISPs are based on relative Total Shareholder Return, free cash flow and revenue growth 1 .

BT also announced that the 2012 and 2013 ISPs for Ian Livingston, the departing CEO, will lapse. This means he will forego up to 2.5 million BT shares as a result of taking up an unpaid post as minister of state for trade in the coalition government.

Ian will however receive the 1.8 million deferred bonus shares he has earned over the past three years. He will also receive shares from his pro-rated 2011 ISP, based on the achievement of challenging performance measures. The current expectation is that he will receive around 800,000 shares under this plan. All of the above shares will be subject to income tax and national insurance.

BT's remuneration committee felt it was appropriate for Ian to receive the above shares given the major contribution he has made to BT's turnaround in recent years, which has seen the company's share price rise in recent days to a twelve year high.

Sir Michael Rake added: Ian has done a wonderful job for BT and so this is clearly reward for success. BT is a far healthier company than it was when he took over as CEO and I am confident it will continue to thrive under Gavin's leadership. We have some tremendous foundations to build on now and there are exciting times ahead.

BT's remuneration policy will be put forward at the 2014 BT Annual General Meeting for approval.

Ends

[1] For full details of the 2013 ISP, see page 82 of the BT Group Annual Report & Form 20-F 2013

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