Sir Iain Vallance stunned the City yesterday with the announcement that he will stand down from the day-to-day running of BT, Britain's largest telecommunications company. But he will continue on his full pounds 480,000 pay.
Another director who will leave in January will continue to be paid his annual pounds 430,0000 until his contract expires in August.
BT has embarked on its most radical change in almost a decade, with Sir Iain keeping the job of chairman but relinquishing the chief executive's job to Peter Bonfield, the long-standing head of ICL, the computer group. Sir Iain denied speculation that he plans to leave the group but said that Mr Bonfield would "unequivocally" have the lead executive role.
Michael Hepher, BT's group managing director, leaves in January but will have his contract, which expires officially in August, honoured. Mr Hepher rejected suggestions that he leaves because he has not been given the top job. He said that he told Sir Iain many months ago that he was "uncertain about his long-term commitment to BT and to telecoms", and that he expected to return to the financial services sector from whence he came.
BT also announced the appointment of Sir Colin Marshall, already a non- executive director, as deputy chairman in succession to Paul Bossonet, who is due to retire.
BT's shares climbed off a thre-year low, rising 5.5p to 360.5p. They have dropped from a year's best of 414p in just two months.
Sir Iain said that the decision to split the top job was made a year ago and that the hunt for a chief executive started then. "I have had a good run at this since 1987, but it was always at the back of my mind that we should get back to the traditional model of separating the roles of chairman and chief executive. My own belief is that you only want those roles combined in times of major change and crisis, such as the move from the public to the private sector."
Sir Iain said that he had no intention of dropping the role of full-time chairman "at the present time", but added: "I have also made it clear I will not spend my whole career at BT."
He rejected the suggestion that he should have taken a non-executive role, saying: "The non-executive chairman is a unicorn - an animal that does not really exist."
The announcement of a shake-up comes within days of the dramatic ousting from rival Cable & Wireless of Lord Young of Graffham and James Ross, respectively chairman and chief executive. It also coincides with a period of deep regulatory uncertainty, with BT facing a reference to the Monpolies and Mergers Commission if it refuses to accept new competition powers sought by the industry regulator, Don Cruickshank.
Mr Bonfield, who takes up his position in January, said that he did not anticipate any "knee- jerk changes".
"The company has made tremendous changes. As to whether there are more things to do - I think so, but at this stage that is a gut reaction."
Mr Bonfield will be paid a basic salary of pounds 475,000 plus an annual bonus of up to 50 per cent of that amount and participation in a long- term incentive scheme. His appointment is initially on a fixed three-year basis, reverting to a one-year rolling contract.
Sir Iain will retain his pounds 480,000 salary with no bonus or incentive entitlement.
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