At the 2008 AGM Chairman Sir Michael Rake and his fellow Board members answered questions from shareholders on a wide range of issues, including:
Questions from the 2008 AGM held at The Barbican, London on Wednesday, July 16, 2008
Several questions were raised by shareholders about the efforts that BT is making to improve its customer service. Ian Livingston explained to the meeting that customer service is at the heart of everything that BT does and is one of the key performance indicators against which BT measures, and will continue to measure, its success. Ian stated that BT has made some significant progress in this area, but also recognised that there is still room for improvement. This is one of his top priorities through the ‘Right First Time’ programme. BT is committed to giving great value to its customers and to this effect has cut prices in a number of areas and has simplified the packages where possible.
Several questions were raised concerning the non-geographic numbers, 0845 and 0870, as to why these were not included in BT’s packages. Here Ian explained that the cost of these calls is regulated by Ofcom and that BT is the cheapest major phone provider per minute for these numbers.
Payment by direct debit
Several shareholders raised their objection to BT’s policy to charge those customers paying their bills by cash or cheque. Sir Michael responded that customers do have a choice as to how they wish to bay their bills and explained that the charge was introduced to cover the higher costs of processing non-direct debit payments. All BT’s competitors either charge for non-direct debit payments or refuse to accept non-direct debit customers. BT has one of the lowest charges of those companies who do accept direct debit payments.
Broadband availability/super-fast Broadband
A shareholder asked, in light of BT’s recent announcement on the roll out of fibre-based super-fast Broadband, how confident BT is in making Broadband available to all rural areas. The meeting was informed that BT would be working with Ofcom, the Government and regional development authorities to help bring super-fast Broadband to as much of the UK as possible. BT is also looking to improve Broadband availability for those people who, due to their location, have some difficulty in receiving Broadband. Developments in fibre and non-fibre-based technology are addressing this issue.
Several questions were raised by shareholders concerning the treatment of agency workers. Sir Michael explained BT appreciates the contribution made by its agency workers. However their terms and conditions are ultimately the responsibility of their employer (ie the agency, not BT). BT does discuss the terms and conditions of employment, which the agencies use, with them as part of broader commercial negotiations. It is in everyone’s interests that agencies can offer terms that both attract and retain top quality people to serve BT’s customers.
Trade union relations
A shareholder asked about the effect that the dispute between BT and Connect (which represents the interests of a number of managerial and professional staff at BT) has had on the Company. Sir Michael responded that the dispute is unfortunate and the Board has tried to avoid it. He felt that the Company had made a fair offer - focussed on the lower paid and higher performing managers. Whilst this dispute is not one BT would choose, he didn’t feel this has had a detrimental impact on the share price or customers.
Several questions were raised concerning BT’s proposed use of the technology of Phorm Inc., a US based software company, particularly over the nature of early technical trials conducted. Several members of the Board responded to these questions. They explained that BT and other companies have announced an agreement with Phorm to offer a free internet service, called Webwise. This provides protection against fraudulent websites and offers more relevant advertising based on sites that customers visit and the topics that they search for. In a competitive market this is a good commercial opportunity for BT. Two technical trials have already taken place, before which BT took legal advice. Another trial is due to begin shortly and customers will be free to choose if they wish to participate in it.
One shareholder referred to recent press reports regarding the difficulties facing BT employees in speaking up about fraud within the company. Sir Michael, stated that whilst the Company cannot comment on individual cases he explained that BT’s values are encapsulated in ‘The Way We Work’ and there are secure mechanisms in place for employees to raise their concerns (such as the whistleblowing helpline). Any instances of fraud are taken extremely seriously and for a business with 112,00 employees, these cases are extremely rare. The Audit Committee regularly receives reports on any such cases and has robust policies and procedures in place to ensure that these are dealt with properly.
BT’s involvement with 2012 London Olympics Games and Paralympic Games
A shareholder asked whether BT will get a good return on its proposed investment in the 2012 London Olympics. Sir Michael commented that he was delighted that BT had been selected as the Official Communications Service Partner for the London 2012 Olympic Games and Paralympic Games, and he was sure there would have been questions if BT has not been selected. Sir Michael went on to say that it was the Board’s view that it was the right thing for BT to commit to supporting 2012 and that the value of the publicity and of the revenues expected to arise from BT’s involvement would more than cover BT’s costs.
The BT pension fund
Sir Michael was asked by a shareholder about the present valuation on the BT pension fund particularly in view of current market conditions. The Chairman and Group Finance Director responded that the pension fund is closely reviewed and the Board is doing everything possible to protect the scheme to ensure that it can meet its long term liabilities for its members. The last valuation at the end of March 2008 showed a surplus and BT is awaiting the next triennial valuation due as at 31 December this year.
Providing shareholder value
One shareholder asked what BT was going to do to reward its loyal shareholders, some of whom had held their shares for many years. Sir Michael responded by stating that the Board is committed to delivering long term shareholder value and believes that dividends are the best way to reward shareholders. The company has delivered strong financial performance in recent years, including the payment of increasing dividends over the last five financial years. Another way BT rewards it shareholders is via special shareholder offers which are detailed in Forward, the BT shareholder magazine.
Another shareholder queried if BT was going to reduce its dividends or change its dividend policy in light of the recent announcement to invest in super-fast Broadband. Sir Michael informed the meeting that the Board remains committed to the dividend and expects to grow dividends per share in the 2008/09 financial year. This concern has been factored into the funding of the super-fast Broadband investment and the buy back of shares is being suspended from the end of July 2008.
One shareholder asked why it takes BT longer than many other companies to pay its dividends. Hanif Lalani responded by saying that BT aligns with Stock Market rules and that we need shareholders to approve the final dividend at the AGM. Only after it’s been approved can it be paid. However, he did agree to review BT’s policy on the timing of payment of dividends.
One shareholder expressed the view that Ian Livingston’s remuneration package was too high and that the performance criteria for the Board were too low. Maarten van den Bergh, as Chairman of the Remuneration Committee, explained that the remuneration policy is rigorously reviewed using external consultants. That policy is to set stretching targets and reward success accordingly. This year BT is increasingly linking remuneration to the creation of long term shareholder value by increasing the proportion of pay received in incentive shares, where any payout requires sustained long term shareholder return performance. It is the most performance-related package for a BT chief executive, where 76% of Ian’s remuneration is variable and directly related to BT’s performance.
Potential conflict of interest for Patricia Hewitt
Two shareholders asked questions over the appointment of Patricia Hewitt as a non-executive director and whether this could lead to potential conflicts of interest in relation to her role as an MP and any political donations that may be made by BT. Sir Michael pointed out that BT does not make any political donations and takes a rigorous apolitical stance. Patricia’s experience of the Government and the NHS together with her international experience is invaluable to BT. Patricia also explained that she was no longer a member of the Cabinet, having chosen to step down and therefore unlikely to return to senior political office. This means that this should not be an issue.