Shareholder votes - statement for the IA's Public Register

In response to the voting outcome on Resolution 2 at the BT Group plc Annual General Meeting on 11 July 2018, this provides the following update to the statement made after the vote.

The Board was naturally disappointed with the overall voting outcome of 65.84% in favour of the 2018 Annual Remuneration Report. Following the vote, the Remuneration Committee Chairman invited a broad selection of shareholders and proxy advisory bodies to meet with him to understand their views on executive pay at BT and why some shareholders had felt unable to support the Remuneration Report.

These discussions highlighted that the primary concern of those shareholders voting against the resolution centred on the level of annual bonus paid to the Chief Executive. Despite the Remuneration Committee’s use of discretion to reduce the formulaic out-turn of the bonus for the financial year ending 31 March 2018, some shareholders felt that the amount paid did not appropriately reflect the underlying performance of the company or take adequate account of the value created for shareholders. Concerns were also expressed about the timing of the decision to pay this level of bonus given the announcement on 8 June 2018 that Gavin Patterson was stepping down as Chief Executive. On all other matters, the Remuneration Committee was pleased to hear that shareholders were supportive of BT’s remuneration policy.

We would like to thank shareholders for taking the time to engage with us and we have noted the feedback. While discretion is ultimately subjective, the Remuneration Committee will take steps to implement a more structured process to help it step through the application of its discretion in the future. This will include taking into consideration a broader range of performance factors and wider circumstances when coming to a decision on pay outcomes.

The Board remains committed to active shareholder engagement, the outcome of which will be reported in full to investors in our Annual Report & Form 20-F 2019. The Remuneration Report will be put to an advisory shareholder vote at the 2019 AGM in the usual manner.

This statement represents, for the purposes of the Public Register, BT’s response in respect of the shareholder vote against Resolution 2 on the Annual remuneration report as set out in the BT Group plc Notice of meeting 2018. 

We are pleased to have received shareholder support for all the resolutions proposed at the AGM but we are naturally disappointed with the lower level of support received for our Remuneration Report for the year ending 31 March 2018.

Historically, both the remuneration report and our remuneration policy have received overwhelming shareholder support and over the past two weeks we have been in dialogue with our major shareholders and proxy advisers to discuss their questions and concerns.

We understand that the lower level of support for the remuneration report is, in the most part, attributable to the annual bonus payment to BT's Chief Executive for the 2017/18 performance year. During the remainder of 2018 we will engage further with our shareholders and proxy advisers to understand in full detail the reasons for their concerns and whether we should consider any changes to our longer term approach to remuneration.

This statement represents, for the purposes of the Public Register, BT’s response in respect of the shareholder vote against Resolution 17 on Auditor’s appointment as set out in the BT Group plc Notice of meeting 2017. Resolution 17 proposed that PricewaterhouseCoopers LLP (PwC) be re-appointed auditors of the Company, to hold office until the end of the next general meeting at which the accounts are laid before the Company.

We had explained in our Annual Report & Form 20-F 2016 that we expected the audit tender to be no later than 2019, with the Audit & Risk Committee keeping external audit arrangements under annual review. We then reported in this year’s Annual Report that, following the Audit & Risk Committee’s review of the external auditors in 2016/17, the Committee recommended to the Board that the audit tender process be accelerated.

In March 2017 we consulted with the Financial Reporting Council (FRC) to ask if we could accelerate a change in auditors to 2017/18 but the FRC confirmed this was not possible under the audit independence and tender rules. Independence had to be established under the FRC Revised Ethical Standard 2016 which requires independence not only from the beginning of the relevant financial year but also in respect of certain services from the beginning of the immediately preceding financial year. The earliest we could replace PwC as our auditors is for 2018/19, leaving them in post for 2017/18.

After a rigorous and comprehensive tender process led by the Audit & Risk Committee, KPMG were selected as the new auditors and their appointment was announced in June 2017. Subject to shareholder approval, KPMG will become our new auditors from the 2018/19 financial year. This enables an effective transition from PwC to KPMG during the 2017/18 audit process.

Ahead of our AGM on 12 July 2017, we also engaged with our top 20 shareholders and offered them a meeting with a member of the Board to discuss any aspects of BT’s business. The reappointment of PwC was difficult for some of our shareholders to support, in light of their voting policies, and their voting reflected that although they acknowledged that the earliest we could replace PwC is for 2018/19.