British telecom giant BT has come in for scathing criticism, when it was revealed yesterday that the company had given large bonuses to its top executives, even after the company posted a £134-million full year loss in the last financial year and axed another 15,000 jobs last week. (See: BT unveils £134 million loss; axes another 15,000 jobs)
The revelation came to light when the company published its annual report for the year yesterday, which had details of the bonuses paid to Francois Barrault, who led the telecoms giant's Global Services arm and was forced to resign in October after incurring huge losses.(See: BT's Global Services takes a hit of £340 million)
Ousted head of the telco's IT operations François Barrault received a total of £2.85 million, including a £1.6 million termination payment, despite massive write-downs at the business as the company discovered that most of the complex contracts that last several years were contracted with poor returns, where Barrault had sacrificed profit for growth.
Although the company attempted to block his termination payment and shares from the company's long-term incentive plan, its lawyers advised BT against doing so.
According to the annual report, Barrault received £1.25 million in salary and benefits such as his company car, home security, and dental cover for his family.
His pay package also included housing allowance, school and social club fees and as per the employment contract signed with the company, Barrault was to get £1.6 million as termination payment.
Apart from this, he also was to receive £283,000 worth of shares under the company's long-term incentive plan, £264,000 worth of shares under its deferred bonus plan and £135,000 worth of unrealised gains on his share options.
The Communication Worker's Union deputy general secretary, Andy Kerr said that the payout to Barrault was outrageous since he was being rewarded for failure.
A company spokesperson said that although the company was disappointed at having to make the payment to Barrault, BT had no choice but to honour its contractual obligations.
The report also revealed that, BT's chief executive Ian Livingston, will receive a £343,000 bonus, a reward for failing to meet any financial targets and sending the company into the red. The company justified the bonus by saying that the award was based on "non-financial" plans.
He will also receive a further £343,000 bonus in three years. This is after his predecessor Ben Verwaayen resigned last June taking home a £700,000 payout and a £300,000 bonus.
This is in sharp contrast to the former groups finance director Hanif Lalani, who replaced François Barrault last October, has volunteered not to be considered for a bonus along with the other staff from the Global Service division, who will not be paid bonuses this year.
BT said that no one will be paid bonuses this year after its pathetic performance last year and added that there will be no pay rises either this year.
All these outrageous bonuses are being doled out even as the company warned in its annual report that it may have to tap the markets for money if the economy does not improve.
If the situation did not improve "we may not be able to generate sufficient cash flow, or access capital markets, to enable us to service or repay our indebtedness or to fund our other liquidity requirements," the report said.