Ian Livingston, the departing chief executive of BT, will receive almost £9m in bonus shares and incentives when he leaves the British telecoms group to become UK trade minister this month.
Mr Livingston, who also received about £8.5m in salary and bonuses in the past year, was asked by the prime minister to take a trade role that comes with a peerage but no salary this summer.
The BT remuneration committee decided Mr Livingston should receive about half the potential payout he was due under his long-term incentive plan for “the major contribution he has made to BT’s turnround in recent years”.
The committee pointed to the company’s share price rise in recent days to a 12-year high. Under Mr Livingston’s tenure, BT’s share price has risen from 75p to more than £3, boosting the pay of the executives that run the company given the link between their incentives and the market capitalisation of the company. Mr Livingston has waived a pay rise for the past two years.
Sir Michael Rake described it as reward for success. “BT is a far healthier company than it was when he took over as chief executive,” he said. The payout, which is subject to tax, will be voted on at the 2014 shareholder meeting.
Mr Livingston, a former accountant, has told the FT that leaving BT was not the best financial decision he has made given the lack of salary in government.
Mr Livingston will miss out on up to 2.5m BT shares under his 2012 and 2013 incentive share plan but will receive 1.8m deferred bonus shares earned over the past three years.
He will also receive 800,000 shares from his 2011 incentive share plan based on the achievement of “challenging performance measures”. The incentive share plan is based on relative total shareholder return, free cash flow and revenue growth.
Mr Livingston is seen by analysts as having successfully returned BT to growth, initially through a drastic cost-cutting programme that slashed 30,000 jobs from the bloated former national telecoms incumbent and more than £2bn in writedowns at the company’s lossmaking global services division.
More recently, he has overseen a more aggressive growth strategy based on a £2.5bn investment in next generation fibre broadband and the £1bn acquisition of sports TV rights to bolster its previously struggling TV business.
Gavin Patterson, the head of the telecom group’s retail business, has taken over from Mr Livingston, although he will not be subject to the same bonus scheme.
Mr Patterson will receive a base salary of £925,000, the same as Mr Livingston, but the maximum bonus based on one year’s performance will be substantially reduced. Instead, there will be an increase in the potential maximum reward for meeting targets over three years.
BT said the change in structure of the chief executive’s bonus is “in line with market trends and following consultation with investors on how to ensure continued focus on long-term delivery”.