BT publishes its Annual Report for FY09

(By Richard Holway 6.00pm 27th May 09) BT has published its Annual Report for FY09 (to end March 09). We will wade through it.

Of note is the news that BT has cancelled all pay rises and cut back on bonuses because the company did not meets its financial targets for the year. "The Committee decided to postpone the increases in on-target bonus levels for 2009/10. In addition, there will be no increases in the salaries of executive directors in 2009/10."

The CEO of BT's problematic Global Services division, Hanif Lalani, will not get a bonus as he asked not to be considered for one.

Former BT GS CEO, Francois Barrault (widely blamed for the current problems but could he really wreak such havoc in such a short period?) received £2.85m; including a £1.6m termination payment. Barrault did however forgo options on around about 1.5m BT shares under the terms of his departure - although one expects they were seriously 'under water' anyway. Barrault stepped down last October. In an echo of a certain other current expenses debate, as an expat, Barrault also got reimbursed for dental cover, a car, home security, financial advice, housing, school fees, international tax preparation, social club membership etc. This kind of huge 'reward for failure' certainly sticks in the gullet.

Another echo of current excesses over pensions for departing CEOs in the banking sector is that Sir Peter Bonfield, who left BT in early 2002, in FY09 was in receipt of a pension of £391K “under pre-existing arrangements”.

Chief Executive Ian Livingston received a basic salary of £802K and a bonus (for FY09) of £343k (to be taken in shares) taking the total for FY09 to £1174K. Ben Verwaayen received £1818K doing the CEO job in FY08. Ben received a £700K termination payment. I still don't understand why people get termination payments when they resign of their own accord. Mind you, I don't understand why failed CEOs get termination payments when they are fired either!

Hanif Lalani, who now heads BT GS, received £805K in FY09.

Non-exec Clay Brendish (ex CEO of Admiral) received fees of £80K in FY09. Eric Daniels, CEO of Lloyds and much criticised for his lack of due diligence over the acquisition of HBOS, received £74K in NED fees.

Update at 10.00pm - I wrote the note above at 6.00pm before the story 'hit the fan'. BT this evening has said that they had attempted to prevent Barrault from collecting this reward but, after taking legal advice, was forced to admit that his contract allowed the payout. A BT spokesman admitted: "We are disappointed at having to make the payment to François but BT honours its legal and contractual obligations."

There is now talk of revolt at the upcoming BT AGM. For almost all my working life I have lived in a world where failure does not just mean losing your job without any compensation. It also means losing your home, your savings and quite possibly your wife too. That's what it's like being self-employed or a business founder/owner.

Even in the 'employed' world, it really is very rare to come across IT Services executives earning £750K, let alone £1m+ pa. But in BT it seems almost common place!

I am all for 'Rewards for Success'. But that means people putting real 'skin in the game' and suffering real, painful consequences for failure too.