This article is from the source 'guardian' and was first published or seen
on .
It last changed over 40 days ago and won't be checked again for changes.
BT chief's pay package slashed by £4m over Italian accounting scandal
BT chief's pay package slashed by £4m over Italian accounting scandal
(about 2 hours later)
The BT chief executive, Gavin Patterson, has had his pay packet cut by £4m after the company scrapped bonus payments following the £530m accounting scandal at its Italian operations.
Telecoms group BT has slashed its chief executive’s pay package by £4m as a result of an accounting scandal and revealed it is to axe 4,000 jobs worldwide.
Patterson will be paid £1.34m for the year to the end of March, mostly consisting of his annual salary of £993,000, a 74% reduction on the £5.28m he received for 2015/16.
Gavin Patterson will now be paid £1.34m for the year to the end of March, mostly consisting of his annual salary of £993,000. His total pay package represents a 74% reduction on the £5.28m he received for 2015-16. The bonus cut, which also applied to the group’s finance director, is the result of a £530m accounting scandal at the group’s Italian operations.
BT also announced that it is to cut 4,000 jobs from its 102,000 global workforce, which will save it £300m over two years and which the company said will “offset market and regulatory pressures and support investment”.
About 2,000 of the planned job cuts will come from BT’s UK operation, with the cuts falling mostly on managerial and back office personnel. The company currently employs 102,000 worldwide and the restructuring is expected to save the company £300m over two years.
The cuts, on which BT has taken a £300m restructuring charge, will come from areas including its troubled global services division. This is home to the Italian operation and triggered a profit warning in January over slow public sector and corporate IT sales.
The bonus cuts and job losses follow huge problems at BT’s global services division, which provides IT and communications services to clients ranging from the BBC to Bromley borough council. It also includes the Italian business at the centre of the accounting scandal.
BT said the division is now under strategic review with the goal of making it a “more digital business”. There has been speculation that it may be sold off, although BT has said it wants to try to turn it around before considering a sale.
In January, £8bn was wiped off BT’s stock market value as it admitted the scandal was far worse than initially thought and would cost £530m. The company had only recently told investors the cost would be £145m. BT has spent £15m in just three months investigating the scandal. BT’s European head, Corrado Sciolla, lost his job as a result of the controversy and was replaced by Luis Alvarez, who is also now leaving.
“As with any part of the business we review assets over time as to whether they still fit with out strategy or whether they are better owned by someone else,” said Patterson. “Global services is part of that [process].”
The profit warning pointed to a sharp slowdown in sales to corporate and public service clients in the UK.
Global services division chief Luis Alvarez is to stand down and will be replaced by Bas Burger, who has been at BT for nine years, most recently as president of its Americas operation.
BT said the division was now under review – there has been speculation that it may be sold off – although BT has said it wants to try to turn it around before considering a sale.
BT’s remuneration committee, headed by former Sky chief Tony Ball, also punished ex-finance chief Tony Chanmugam, who saw his total remuneration plummet by 91% from £2.8m to £258,000 as a result.
Patterson and finance director Tony Chanmugan both said that they would not have accepted bonuses linked to the company’s performance if they had been awarded.
Patterson and Chanmugan both said that they would not have accepted bonuses linked to the company’s performance if they had been awarded.
“I believe as chief executive you need to set an example... I felt it would be inappropriate to take a bonus if one was due,” said Patterson. “As a chief executive, you need to be setting an example for everyone across the business. ”
“I believe as chief executive you need to set an example and so I signalled to the board back in January when we announced the [extent of the] problems in Italy I felt it would be inappropriate to take a bonus if one was due,” said Patterson in an interview. “As a chief executive you need to be setting an example for everyone across the business. Shareholders are disappointed in terms of what has happened in Italy in particular but they support the [overall] strategy.”
Tony Ball, the former boss of Sky TV and chairman of BT’s remuneration committee, said the Italian scandal was not the only reason bonuses were withheld. He also pointed to a £42m fine imposed on BT-owned Openreach, the largest ever handed out by the regulator, for issues including blaming broadband installation delays on factors beyond its control but when this was found not to be the case.
Ball also pointed to issues in the last year including a £42m fine imposed on BT-owned Openreach, the largest ever imposed by the regulator, for issues including blaming broadband installation delays on factors beyond its control when this was not the case.
“The past year has been challenging,” said Ball. “Although good progress has been made in a number of areas, unfortunately our performance has been significantly affected by the accounting irregularities in our Italian business, the issues that arose in Openreach ... the significant challenges we faced in the UK public sector and international corporate markets. The committee has made a number of difficult decisions this year in light of these circumstances and exercised its discretion accordingly.”
“The past year has been challenging,” said Ball. “Although good progress has been made in a number of areas, unfortunately our performance has been significantly affected by the accounting irregularities in our Italian business, the issues that arose in Openreach ... the significant challenges we faced in the UK public sector and international corporate markets. The committee has made a number of difficult decisions this year in light of these circumstances and exercised its discretion accordingly.”
BT also clawed back shares worth £338,398 awarded to Patterson and £193, 412 to Chanmugan under its incentive share plan for 2014/15, 2015/16 and 2017/18.
BT also clawed back shares worth £338,398 awarded to Patterson and £193, 412 to Chanmugan.
The telecoms group also said that taking into account its lacklustre stock market performance over the last year, the level of the incentive share plan award for this year has been reduced from 400% to 350% of salary.
Details of the bonus cuts and job losses came as BT reported a 19% fall in pre-tax profits to £2.3bn for the year to the end of March.
“The remuneration committee will keep under active review whether any additional employees’ awards should be adjusted,” the company said.
BT’s TV operation, which includes Premier League and Champions League coverage, signed up just 11,000 new subscribers in the three months to the end of March. BT blamed higher prices for broadband and phones that affected the take-up of the BT TV and sport service.
BT reported a 19% fall in pre-tax profits to £2.3bn for the year to the end of March, and a 48% drop in its final quarter to £440m, which was broadly in line with its revised outlook issued in January.
“It is one of the lowest quarters BT has ever delivered in terms of TV subscriber numbers,” said one city analyst.
The company’s full-year dividend was up 10% to 15.4p but BT said that for the coming financial year it was reducing guidance.
Patterson admitted that it had been a “soft” quarter , but said audiences were up 12% year-on-year, and that the business should be judged on an annual basis.
“Our dividend policy remains progressive but 2017/18 dividend growth will be lower than the 10% previously anticipated,” the company said. Bt also said it was slightly reducing its profit guidance for this year.
In January, BT saw £8bn wiped its stock market value as it admitted the Italian accounting scandal was far worse than initially thought and would cost £530m, not the £145m it had told investors. BT said that it spent £15m investigating the scandal in its final quarter to the end of March. The scandal cost BT’s European head, Corrado Sciolla, his job.
BT said it will launch a consultation to explore the large-scale rollout of a “full fibre” broadband network.
The UK, and BT as the owner of Openreach, has been criticised for failing to invest in an ultrafast “full fibre” network, leaving it lagging countries including Italy, Spain and Portugal.
Openreach is consulting on a plan to potentially make ultrafast broadband, speeds of 100mb or more, to 10m homes by the middle of next decade.
Currently, Openreach has only put what is termed as fibre to the home into less than 500,000 premises.
“With the right conditions we could make full fibre connections available to as many as 10m homes and businesses by the mid-2020s, but we need to understand if there’s sufficient demand to justify the rollout, and support – across industry, Ofcom and government – for the enablers needed to build a viable business case,” said Clive Selley, chief executive of Openreach.
BT is also consulting on a plans to bring faster speeds to “not spots” accounting for 3% of the UK that can’t get reasonable speeds of 10Mb or more.
