BT chiefs take 10% pay cut

Sir Iain Vallance, chairman and chief executive of BT, took a cut of almost 10 per cent in his total pay to pounds 599,000 last year, writes Mary Fagan. The group managing director, Michael Hepher, also saw his pay fall by about 10 per cent to pounds 537,000.

The reductions in salary emerge in BT's annual report, which also reveals that one-year rolling contracts for directors will be introduced by August next year. At present, directors are employed under fixed three-year terms, which can be extended by a year on each anniversary of their joining the company.

In addition, the company's share option scheme has been scrapped and replaced with a long-term remuneration plan. During the year to 31 March, it was announced that Sir Iain made a profit of pounds 640,753 through exercising options on about 374,000 shares.

Under the new five-year scheme, which depends on BT meeting performance criteria relative to other FT-SE 100 stocks, shares will be held in trust and dividends invested in additional shares. Individuals will also have to invest part of their bonuses in BT shares to benefit from the scheme.

The awards each year are expected to take account of the views of shareholders. The scheme will be explained in more detail in notices to be sent out in advance of the annual general meeting in July.

The changes come as the business community awaits the report of the Government- backed Greenbury committee on the whole issue of boardroom pay and conditions. But Paul Bossonet, chairman of BT's remuneration committee, said: "We decided a year or so back to introduce one-year rolling contracts. A lot of people have been thinking about these things for a year or two now."

Mr Bossonet said that reductions in the pay of Sir Iain and Mr Hepher were caused by lower bonuses than the previous year. "The view was that although the company did well financially, it was an average year. Who knows what will happen in future?"

Mr Bossonet said the criteria for setting the level of bonus ranged from financial targets and quality of service to "how you get along with the regulator".