BT ran into a fresh "fat cat" controversy yesterday after disclosing that its chief executive was paid more than £3m last year even though the share price fell by a third and the company was forced to abandon its key sales target.
Ben Verwaayen, who took over from Sir Peter Bonfield in February last year, was paid £2.174m in 2002-03 and was also awarded a deferred bonus payable in three years worth a further £849,000.
In addition to his pay, he is also sitting on £1.56m worth of "retention" shares which can be cashed in two years from now and 2.6 million share options. Most of the share options, however, are worthless because the exercise price is above BT's current market price.
A senior source within the Communications Workers Union, said: "This is a ludicrous amount to give the chief executive of BT at a time when the company says it needs to save money by exporting jobs from Britain to India where it can pay less even than the minimum wage."
The package earned last year by Mr Verwaayen, a Dutchman who joined BT from the American telecoms equipment company Lucent, was made up of £700,000 in base salary, £849,000 in annual bonus, a £140,000 pension contribution and £485,000 in other benefits. These other benefits include £200,000 in relocation expenses and a £250,000 housing allowance. Mr Verwaayen now lives in a £2.25m mansion in Surrey.
Mr Verwaayen was forced to scrap his target of growing BT's top line sales by 6-8 per cent within months of taking the job because of pressure from rival operators in its core UK market.
However, a BT spokesman said that the sales growth target was not one of the three measures against which Mr Verwaayen's pay and bonuses were calculated.
"The targets were based on earnings per share, cash flow and customer satisfaction and in these three areas we have performed extremely well," he added.
The spokesman also pointed out that there would be no increase in basic pay for executive directors this year for the second year running as more emphasis was placed on performance-related pay.
Performance targets for the current financial year were also "significantly more challenging" than last year. In 2002-03, Mr Verwaayen's bonus was 120 per cent of his base salary. This year, it will be 67 per cent. For six executives it could rise to 100 per cent but only for "truly exceptional performance".
BT's second-best paid executive was its group finance director, Ian Livingstone, who received £1.116m. Mr Livingstone, who joined the company in April last year from the electrical store group Dixons, earned £561,000 in salary and fees, an annual bonus of £338,000, and a special bonus of £190,000 to compensate him for the bonus he would have received had he not left Dixons.
Sir Christopher Bland, the BT chairman, earned £512,000, up from £461,000 the previous year. He also holds 318,000 long-term incentive shares and 314,000 share options which are, like Mr Verwaayen's, also out of the money.
Philip Hampton, who left his job as finance director in April last year to join Lloyds TSB in the same role, received a termination payment of £217,500, being the balance remaining of his initial service contract.
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