BT faces bonuses revolt

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British Telecom faces a shareholder revolt at today's annual meeting after failing to stem City concern about its new executive bonus scheme.

The company, which yesterday announced an 11.9 per cent rise in profits to pounds 874m in the first quarter of the year, launched a charm offensive in the City to try to win institutional support for the changes.

But Standard Life and Norwich Union, the insurance companies, said they intended to vote against the incentive arrangements despite assurances from BT to review the scheme.

The new bonus plan replaces the company's option scheme and is designed to eventually cover the top 200 executives. They will get the maximum bonus if the share price is among the top 40 performers in the FT-SE 100. The level of payout is staged, and executives get nothing if the share price is among the 20 worst performers.

Dick Barfield, head of UK investments at Standard Life, which owns 2 per cent of BT, complained that the scheme bore little relation to the underlying performance of the company. He wanted the bonus levels measured by profits and earnings. Norwich Union, which holds 1.8 per cent of BT, said that the incentive criteria were too undemanding. "The point at which executives start to benefit from the share performance is far too low," Norwich said.

BT, chaired by Greenbury committee member Sir Iain Vallance, believed it had enough support to get the scheme approved. However, the performance targets would be tightened next year.

Hermes, formerly known as PosTel, intends to back the scheme, and Prudential is also believed to be in favour, because the changes are in the spirit of Greenbury's suggestion that companies move away from executive share options.

Meanwhile, BT said yesterday that a "slackening" in growth in the UK economy held back increases in inland telephone calls in the first quarter of the year for the first time since 1992. Robert Brace, finance director, said the drop in growth rates on a 12-month moving average is small but significant and underlines the lower growth in the economy since Christmas. He said: "It is clear that no dampening of consumer demand is needed at the moment. I think it is damp enough."

The 11.9 per cent increase in pre-tax profits to pounds 874m in the three months to 30 June was helped by a sharp fall in redundancy costs to pounds 22m from pounds 54m in the same period last year.

Earnings rose 13.3 per cent to 9.2p. Before the effect of redundancy charges, the increase in earnings per share was 8.3 per cent. Turnover grew 3.5 per cent to pounds 3.5bn.

Investment Column, page 20