Item 6 --- Directors, Senior Management and Employees
During fiscal 2003 the business of BA was directed by a Board of
Directors which consisted of 12 members until
July 16, 2002 and 11 members for the remainder of the year. All Directors are
subject to retirement every three years and are eligible for re-election by the
shareholders. The Directors of BA as at June 30, 2003 (and their respective
ages) were:
CHAIRMAN
Lord Marshall of Knightsbridge (69)
Board Member since 1983, Chief Executive 1983-1993, Executive Chairman
1993-1996; Non-executive Chairman since 1996. Chairman of the Nominations
Committee. He will remain Chairman of Invensys plc until July 23, 2003, and is a
non-executive director of HSBC Holdings plc.
CHIEF EXECUTIVE
Roderick Eddington (53)
Executive Board member since 2000. Rod Eddington joined the Company as Chief
Executive in May, 2000. He is also a non-executive director of News Corporation
and of John Swire & Son Pty Limited.
CHIEF FINANCIAL OFFICER
John Rishton (45)
Executive Board member since September, 2001. Having originally joined the
Company in 1994, John Rishton was appointed as Chief Financial Officer in
September, 2001.
DIRECTOR OF CUSTOMER SERVICE AND OPERATIONS
Michael Street (55)
Executive Board member since December, 2000. Mike Street has been Director of
Customer Service and Operations since 1997. He also sits on the Council of
Buckinghamshire Chiltern University College.
NON-EXECUTIVE DIRECTORS
Maarten van den Bergh (61)
Non-executive Director since July, 2002. Audit and Nominations Committees. He is
Chairman of Lloyds TSB Group Plc and a non-executive director of BT Group plc
and Royal Dutch Petroleum Company, having previously been President of Royal
Dutch Petroleum Company and Vice-Chairman of the Committee of Managing Directors
of the Royal Dutch/Shell Group of companies.
Martin Broughton (56)
Non-executive Director since May, 2000. Chairman of the Audit Committee and
senior independent non-executive director. Nominations, Remuneration and Safety
Review Committees. Martin Broughton is Chairman of British American Tobacco
p.l.c.
Dr Ashok Ganguly (67)
Non-executive Director since 1996. Audit and Safety Review Committees. A Fellow
of the Royal Society of Chemistry, Ashok Ganguly is Chairman of Technology
Network (India) Private Limited and ICICI OneSource Ltd, director of ICICI
Knowledge Park Ltd, Mahindra & Mahindra Ltd, Wipro Corporation, Tata AIG Life
Insurance Co. Ltd, the Reserve Bank of India, Hemogenomics Pvt Ltd and New Skies
Satellites.
Captain Michael Jeffery (58)
Non-executive Director since October, 2001. Chairman of the Safety Review
Committee. Captain Jeffery was Director of Flight Operations from 1995 until his
retirement in June 2001. He is also a member of the West Michigan University
College of Aviation Advisory Board.
Baroness O'Cathain (65)
Non-executive director since 1993. Audit and Safety Review Committees. Baroness
O'Cathain is also a non-executive director of BNP Paribas UK Plc, and South East
Water plc.
Dr Martin Read (53)
Non-executive director since May, 2000. Chairman of the Remuneration Committee.
Martin Read is Group Chief Executive of CMGLogica plc and a non-executive
director of Boots Group PLC.
Lord Renwick of Clifton (65)
Non-executive director since 1996. Remuneration and Safety Review Committees.
Previously British Ambassador to the United States and to South Africa. He is
Vice Chairman Investment Banking of J P Morgan Europe, Chairman of Fluor Ltd,
director of BHP Billiton Plc, Harmony Gold, SABMiller Plc, Compagnie Financiere
Richemont AG and a Trustee of The Economist.
Service Contracts of Executive Directors
Each of the three executive Directors has a rolling contract with a
one-year notice period There are no express provisions for compensation payable
upon early termination of any of the executive Directors' service contracts
other than payments due during the notice period. The service contracts include
the following terms:
Executive Date of contract Unexpired term/notice period
Director
Rod Eddington July 7, 2000 terminable on 12 months notice
or upon reaching retirement age,
which is 60 in his case
Mike Street July 1, 2001 terminable on 12 months notice
or upon reaching retirement age,
which is 65 in his case
John Rishton September 1, 2001 terminable on 12 months notice
or upon reaching retirement age,
which is 63 in his case
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Service Agreements of Non-Executive Directors
Except where appointed at a general meeting of shareholders of the
Company, non-executive Directors stand for election by shareholders at the first
Annual General Meeting of shareholders following appointment and stand for
re-election every three years thereafter. Under his letter of engagement, the
Chairman, Lord Marshall, is entitled to one year's notice of termination of his
appointment. There is no express provision for compensation payable upon early
termination. None of the other non-executive Directors has any right to
compensation on the early termination of their appointment. As at June 30, 2003,
the dates of the Chairman's and current non-executive Directors' appointments
are as follows:
Date of election/
Non-executive Date of appointment last re-election Expiry date
Lord Marshall December 13, 1983 July 16, 2002 July 20, 2004
Maarten van den Bergh July 16, 2002 July 16, 2002 July 19, 2005
Martin Broughton May 12, 2000 July 15, 2003 July 18, 2006
Dr Ashok Ganguly April 12, 1996 July 16, 2002 July 19, 2005
Captain Michael Jeffery October 1, 2001 July 16, 2002 July 19, 2005
Baroness O'Cathain May 27, 1993 July 15, 2003 July 20, 2004
Dr Martin Read May 12, 2000 July 15, 2003 July 18, 2006
Lord Renwick March 1, 1996 July 16, 2002 July 19, 2005
In addition to Rod Eddington, John Rishton and Mike Street above, the
executive officers of the BA Group listed below each have service agreements.
Paul Coby, (47), Chief Information Officer. Joined the airline in 1996 as Im
Systems Supply Board Manager becoming Chief Information Officer in 2000.
Lloyd Cromwell Griffiths, (58), Director of Flight Operations. Joined the
airline in 1973 as a pilot becoming Director of Flight Operations in 2001.
Martin George, (41), Director of Marketing and Commercial Development. Joined
the airline in 1987 as a Brand Manager becoming Director of Marketing in 1997,
taking on responsibility for Commercial Development in 2002.
Alan McDonald, (53), Director of Engineering. Joined the airline in 1966 as an
Apprentice Engineer becoming Director of Engineering in 2001.
Roger Maynard, (60), Director of Investments and Alliances. Joined the airline
in 1987 as Vice-President Commercial Affairs North America, becoming Director of
Corporate Strategy in May 1991.
Dale Moss, (54), Director Sales Worldwide. Re-joined the airline in 1993 as
Senior Vice President Sales in the United States, becoming Director of Sales in
1998.
Neil Robertson, (50), Director for People. Joined the airline in 1976 as a
graduate trainee becoming Director for People in 2002.
Robert Webb QC, (54), General Counsel. Joined the airline in 1998 and has
responsibility for Legal, Government and Industry Affairs, Safety, Security,
Risk Management, Community Relations and the Environmental departments of the
airline.
Alan Buchanan, (45), Company Secretary. Joined the airline in 1990 as Principal
Legal Adviser Finance becoming Company Secretary in April 2000.
Compensation of Directors and Officers
The remuneration of the executive Directors for the year ended March 31,
2003 was:
Rod Eddington John Rishton Mike Street
2003 2003 2003
(Sterling'000)
Basic salary 531 244 309
Bonus 0 0 0
Taxable benefits* 22 12 19
Total 553 256 328
* Taxable benefits include a company car or cash equivalent, fuel, private
health insurance and personal travel.
The remuneration (fees and taxable benefits) paid to non-executive
directors for the year ended March 31, 2003 were:
2003
(Sterling'000)
Fee Taxable benefit*
Lord Marshall 250 1
Maarten van den Bergh (1) 21 0
Martin Broughton 35 0
Michael Davies (2) 9 0
Dr. Ashok Ganguly 33 0
Captain Michael Jeffery 47 16
Baroness O'Cathain 36 0
Dr Martin Read 29 1
Lord Renwick 30 0
The Hon. Raymond Seitz (2) 8 0
Total 498 18
* Taxable benefits include a company car or cash equivalent, fuel, private
health insurance and personal travel.
1. Appointed to the Board of Directors on July 16, 2002
2. Retired from the Board of Directors on July 16, 2002
The Chairman's fee is determined by the Remuneration Committee. Fees for
the non-executive Directors (other than the Chairman) are determined by the
executive Directors on the recommendation of the Chairman. For fiscal 2003,
these fees were set in April 2001 and were a basic fee of Sterling 27,500 per
annum plus Sterling 600 for each Board Committee meeting separately attended.
The Chairman of the Safety Review Committee receives Sterling 15,000 per annum
for his chairmanship in addition to the fee paid to the other non-executive
Directors and is provided with a company car and fuel. The review of these fees,
scheduled for April 2003, has been deferred for six months. The Chairman and the
non-executive Directors are not eligible to participate in the long term
incentive plan nor in the share option scheme (discussed below). Their fees are
not pensionable. Lord Marshall and Captain Jeffery, being former executives of
the Company, are in receipt of pensions. As a former executive, Lord Marshall
retains options under the 1987 share option plan and, similarly, Captain Jeffery
retains conditional share options under the long term incentive plan, granted,
in each case, while they were serving as executives of the Company.
For 2003, the aggregate compensation paid or accrued (excluding pension
benefits) by BA to all members of the Board of Directors and its other executive
officers named above during the year for services in all capacities was Sterling
3,802,121. Also during fiscal 2003, pension contributions of Sterling 401,469
were paid for the benefit of members of the Board of Directors and BA's other
executive officers. For the year ended March 31, 2003 Rod Eddington earned an
annual pension of Sterling 18,417, John Rishton earned an annual pension of
Sterling 9,861, and Mike Street earned an annual pension of Sterling 7,828.
Rod Eddington and John Rishton are members of both the New Airways
Pension Scheme (NAPS) and an Unfunded Unapproved Retirement Scheme which, under
the terms of their service contracts, will provide a total retirement benefit
equivalent to 1/30th and 1/56th respectively of basic salary for each year of
service as directors. Mike Street is a member of NAPS which will provide 1/56th
of pensionable pay for each year of service.
The Audit Committee meets at least quarterly under the chairmanship of
the senior independent non-executive director, Martin Broughton. As at June 30,
2003, its other members were Ashok Ganguly, Baroness O'Cathain and Maarten van
den Bergh all of whom are independent non-executive directors. The external and
internal auditors, the General Counsel and the Company Secretary normally attend
all meetings of the Committee and have rights of access to the Committee.
Executives attend as required. The Committee reviews the Company's financial
statements to ensure that its accounting policies are the most appropriate to
the Company's circumstances and that its financial reporting presents a balanced
and understandable assessment of the Company's position and prospects. It also
keeps under review the Company's system of internal control, including
compliance with the Company's code of business conduct and the scope and results
of the work of internal audit and of external audit, together with the
independence and objectivity of the auditors. The Committee is also responsible
for oversight of the Company's policy on whistleblowing.
The Remuneration Committee of the Board meets at least once a year to
determine the Company's policy on executive directors' remuneration and
remuneration for senior executives immediately below Board level, to review that
remuneration, and to consider and decide grants under the Company's long term
incentive and share option plans. The Committee is chaired by Martin Read, an
independent non-executive director and its other members as at June 30, 2003,
were Martin Broughton and Lord Renwick who are also independent non-executive
directors. No director is involved in deciding his own remuneration.
The executive directors of the Company receive options pursuant to the
Company's performance incentive plans in relation to which corporate performance
targets set at the beginning of each financial year by the Remuneration
Committee.
Options to Purchase Securities from Registrant or Subsidiaries
As of June 30, 2003 employees of the Company held options to purchase
63,742,876 Ordinary Shares at exercise prices ranging between 157p and 465p per
Share.
The following Directors held options to purchase ordinary shares of
British Airways Plc granted under the British Airways Executive Share Option
Scheme 1987 and the British Airways Share Option Plan 1999, as at June 30, 2003.
In line with market practice at the time, options awarded under the 1987 scheme
are not subject to any performance condition. Options awarded under the 1999
plan are subject to a performance condition as detailed below. The interests in
options held by the Directors as of June 30, 2003 were as follows:
Number of Exercise Exercisable for
Date of grant options price seven years from Expiry Date
Lord Marshall July 1, 1994 12,903 372p July 1, 1997 July 1, 2004
August 11, 1994 95,465 419p August 11, 1997 August 11, 2004
Balance 108,368
Rod Eddington May 26, 2000 138,888 360p May 26, 2003 May 26, 2010
June 26, 2001 163,551 321p June 26, 2004 June 26, 2011
July 1, 2002 290,055 181p July 1, 2005 July 1, 2012
June 25, 2003 350,318 157p June 25, 2006 June 25, 2013
Balance 942,812
John Rishton August 26, 1999 21,852 394p August 26, 2002 August 26, 2009
June 28, 2000 31,578 380p June 28, 2003 June 28, 2010
June 26, 2001 70,093 321p June 26, 2004 June 26, 2011
July 1, 2002 124,309 181p July 1, 2005 July 1, 2012
June 25, 2003 191,082 157p June 25, 2006 June 25, 2013
Balance 438,914
Mike Street August 26, 1999 71,903 394p August 26, 2002 August 26, 2009
June 28, 2000 75,605 380p June 28, 2003 June 28, 2010
June 26, 2001 95,015 321p June 26, 2004 June 26, 2011
July 1, 2002 168,508 181p July 1, 2005 July 1, 2012
June 25, 2003 203,821 157p June 25, 2006 June 25, 2013
Balance 614,852
In addition to the above, John Rishton and Mike Street each hold 814
options at 238p under the 2000 operation of the British Airways Savings Related
Share Option Scheme 1996, exercisable for a six month period from June 1, 2003.
Long Term Incentive Plan 1996
The following Directors held conditional awards of options over Ordinary
Shares of British Airways Plc granted under the British Airways Long Term
Incentive Plan 1996:
The conditional awards of options held by the Directors as of June 30,
2003 were as follows:
Date of award Number of conditional awards
Rod Eddington June 5, 2000 69,025
June 8, 2001 105,000
June 12, 2002 185,731
June 9, 2003 294,643
Total 654,399
Mike Street July 2, 1999 15,644
June 5, 2000 39,662
June 8, 2001 61,000
June 12, 2002 107,901
June 9, 2003 171,429
Total 395,636
John Rishton June 8, 2001 45,000
June 12, 2002 79,599
June 9, 2003 160,714
Total 285,313
Captain Michael Jeffery July 2, 1999 8,835
June 5, 2000 22,392
Total 31,227
Employees
In fiscal 2003, the Group employed an average of 57,014 employees and
employee costs represented approximately 28% of total Group operating expenses.
Employee ownership in the Company is encouraged. As at May 12, 2003, some 52% of
employees owned 2.34% of the Company's shares.
The following table sets forth information regarding the Company's
employees:
Average Number Employee costs as a percentage of
Fiscal Year of Employees total Group operating expenditure
2003 57,014 28%
2002 61,460 28%
2001 62,175 27%
In 2003, approximately 83% of the Company's employees were based in the
United Kingdom with the remainder based abroad, principally in Continental
Europe and North America.
As at March 31, 2003, the workforce in the targetted divisions of the
Group (including BA Citiexpress, BA Travel Shops and BA Holidays) had been
reduced by the manpower equivalent of 10,182 employees pursuant to cost control
measures arising from the general economic downturn and the events of September
11, 2001. The Group has announced plans to reduce this workforce by an
additional 2,828 manpower equivalents by September, 2003. When fully
implemented, these reductions would amount to a total manpower equivalent
reduction of approximately 23% since August 2001. British Airways is working
with its unions and other related parties to achieve these reductions through
voluntary means and is committed to maintaining positive relations with
employees.
British Airways recognizes five unions in the United Kingdom with whom
negotiations on pay and other terms and conditions of employment are conducted.
With the exception of senior management, all British Airways staff in the United
Kingdom are covered by collective bargaining agreements. The majority of
overseas staff are covered by such agreements. As in most labor intensive
industries, strikes, work stoppages and other organized labor activities can
have significant adverse effects on operating and financial results.
Pensions
On May 10, 2002, British Airways announced the decision to change the
pension provision for any future UK employees, moving from a defined benefit
final salary basis, to a defined contribution basis. This followed a thorough
review of pension arrangements, taking into account the changing competitive
environment, new accounting rules (FRS17), market volatility and rising life
expectancy. The move gives the Company greater certainty over long term
employment costs. The new defined contribution plan was introduced for new UK
employees on April 1, 2003. The pension benefits for both serving staff and
pensioners, are unaffected.
Share Ownership
The interests in shares held by the Directors as of March 31, 2003 were
as follows:
British Airways
British Airways Plc
Ordinary Shares Capital Limited
Convertible Capital
Bonds
% of issued
March 31 April 1 March 31 April 1 share
2003 2002 2002 2001 capital
Lord Marshall 69,225 69,225 11,304 11,304 0.006
Rod Eddington --- --- --- 0.000
Mike Street 6,678 6,678 --- --- 0.000
John Rishton 2,039 2,039 0.000
Maarten van den Bergh 2,000 ---
Martin Broughton 24,090 9,090 --- --- 0.002
Dr. Ashok Ganguly 104 104 --- --- 0.000
Captain Michael Jeffery 2,624 2,624 --- --- 0.000
Baroness O'Cathain 10,000 6,000 --- --- 0.000
Dr Martin Read 8,000 8,000 --- --- 0.000
Lord Renwick 32,014 32,014 --- --- 0.003
Total 156,774 135,774 11,304 11,304 0.014
No Director has any interest in the share capital of any of the
Company's subsidiaries other than Lord Marshall in the 9.75% Convertible Capital
Bonds 2005 of British Airways Capital Limited.
In addition to the Directors, the executive officers of BA held
interests in 2,326,116 options as of June 30, 2003.
British Airways Executive Share Option Scheme 1987
The Company adopted the Executive Share Option Scheme 1987 in 1987, and
granted options under this scheme through 1995 to a selected group of key
full-time executives. The maximum allocation per executive was four times the
greater of the executives emoluments for the current or the preceding year of
assessment.
Options were granted at an option price which was not less than the
greater of the market value of the shares and the nominal value thereof. Grants
were made within 42 days of the preliminary announcement of the Company's final
results and/or the preliminary announcement of the Company's half-yearly results
in respect of any financial period. Options are exercisable between the third
and tenth anniversary of the date of grant, conditional on the executive
remaining in employment.
Of the Board members only Lord Marshall retains options under this
scheme.
British Airways Savings-Related Share Option Scheme 1996
Set out below is a summary of the principal features of the British
Airways Savings-Related Share Option Scheme 1996 ("Savings-Related Scheme"). The
plan was last operated in the year ended March 31, 2000 and the resultant
options became exercisable in June 2003 and remain exercisable for six months.
The Company expects to launch a new plan when the commercial environment is
appropriate.
All full-time executive directors and all employees (full-time or
part-time) who have worked for the Company or a participating company for a
qualifying period as determined by the Directors (but not to exceed five years)
and any other employees nominated by the Directors are eligible to participate
in the Savings-Related Scheme.
Employees granted an option under the Savings-Related Scheme must enter
into a savings contract with a designated savings carrier under which they make
monthly savings for a period of three years or, if the Directors determine, any
other period permitted under the relevant legislation. The monthly savings must
not exceed the limit imposed by the relevant legislation (currently Sterling 250
per month). A bonus determined by the Inland Revenue will be payable after three
years. An option is granted to the employee which is normally exercisable within
six months after the bonus is payable under the savings contract using the
amount saved plus the bonus.
Options will be granted at an option price which is not less than 80% of
the average of the market value of the shares for the three days following the
14th day after invitations are sent out (or some other date agreed with the
Inland Revenue) or, where shares are to be subscribed their nominal value (if
greater). Market value means on any day the average of the middle market
quotation derived from the UK Financial Services Authority Daily Official List
over the three preceding business days.
Options are normally exercisable for a six month period following the
bonus date under the relevant savings contract. If the option is not exercised
within this six month period, the option will lapse. Options may also, however,
be exercised early in certain circumstances, for example on the option holder
ceasing to be an employee due to death, injury, disability, redundancy,
retirement or following change of control of the employing company and in the
event of a takeover or winding-up of the Company. Exercise is also allowed where
the employee leaves, if the option has been held for more than three years. If
any option is exercised early, the option holder may only use the savings made
under the savings contract (together with any interest) at that time to exercise
the option.
The overall limits on the number of shares which may be issued under the
Savings-Related Scheme are set out below. For the purposes of these limits,
options which lapse cease to count.
In any ten-year period, not more than 10% of the issued Ordinary Share
capital of the Company may, in aggregate, be issued or be issuable under the
Savings-Related Scheme and any other employees' share scheme operated by the
Company; and
In any four-year period, not more than 4% of the issued Ordinary Share
capital of the Company may, in aggregate, be issued or be issuable under the
Savings-Related Scheme and any other employees' share scheme adopted by the
Company. At the Annual General Meeting on July 16, 2002, shareholders agreed to
remove this particular limit for future plans.
No options may be granted under the Savings-Related Scheme after the
tenth anniversary of the date of the approval of the scheme rules by the
Company.
British Airways Long Term Incentive Plan 1996
Set out below is a summary of the principal features of the British
Airways Long Term Incentive Plan 1996 ("Incentive Plan"), which was adopted at
the Annual General Meeting on July 16, 1996. At the time it was intended to
operate the Incentive Plan annually. All executive directors and employees of
the Company and any subsidiaries (designated by the Directors) who were not
within two years of compulsory retirement were eligible to participate in the
Incentive Plan.
In relation to grants made in 1996, 1997 and 1998, all executive
directors and employees of the Company and any subsidiaries (designated by the
Directors) who were not within two years of compulsory retirement were eligible
to participate in the Incentive Plan. Individual participation was linked to
seniority and the maximum participation was limited to 75% of salary.
As a result of the introduction of the British Airways Share Option Plan
1999 (see below), grants made in 1999 and subsequent years are restricted to
Executive Directors and the most senior group of executives who are not within
two years of compulsory retirement. Maximum participation continues to be
limited to 75% of salary.
Awards of shares are made to selected executives under the Incentive
Plan at the discretion of the Remuneration Committee (which consists wholly of
non-executive Directors). Awards will vest at the end of a performance period.
In relation to the awards made in 1999, 2000 and 2001, achievement against the
performance condition is tested for a one third tranche of each award on the
third, fourth and fifth anniversary of the start of the financial year in which
the award was made. In relation to awards made under the Incentive Plan from
2002 onwards, the performance condition will be tested in relation to the whole
award on the third anniversary of the start of the financial year in which the
award was made.
On the vesting of an award, the executive will be entitled to be granted
an option to acquire some or all of the shares awarded depending on the extent
to which the performance conditions, set at the time the award was made, have
been satisfied.
An option granted in respect of an award is exercisable immediately and
will lapse if not exercised within seven years of grant. No consideration is
payable for the shares on the exercise of the option granted on the vesting of
an award. No shares will be issued under the Incentive Plan. Entitlements will
be satisfied from shares held in an employee benefit trust.
The performance condition set by the Remuneration Committee for the
operation of the Incentive Plan in 1996 through 2003 was based on total
shareholder return ('TSR') over that relevant performance period. In addition,
the Remuneration Committee will consider whether or not the Company's overall
financial performance (for example growth in earnings per share) justifies the
vesting of an award and the grant of an option. TSR will be measured by
reference to the movement in the price of a share and the value of gross
dividends paid in respect of the Company's Ordinary Shares.
Grants made in 1996, 1997 and 1998 failed to achieve the required TSR
performance condition and have now lapsed.
In relation to grants made in 1999 and subsequent years, in order for an
award to vest in full the TSR in respect of an Ordinary Share of the Company
over the performance period must be such as to place it at or above the 90th
percentile when compared with the TSR for each of the Comparator Companies over
the same period. Where the TSR for the Company over the performance period is at
or below the 50th percentile, no shares will be acquired. Where the TSR for the
Company over the performance period is between the 50th and 90th percentiles,
the number of shares over which an option will be granted will be calculated in
accordance with a pre-determined formula.
No awards may be made under the Incentive Plan after the tenth
anniversary of the date of the approval of Plan rules by the Company.
British Airways Share Option Plan 1999
On July 13, 1999, at the Annual General Meeting, the shareholders
approved the British Airways Share Option Plan 1999 (the "1999 Share Option
Plan"). The 1999 Share Option Plan is intended to operate mainly for senior
managers.
The aggregate exercise price of options granted will not exceed the
individual's basic salary in any one year. Exercise of options will be subject
to a performance condition linking the exercise of options to sustained
improvements in the underlying financial performance of the Company. For options
awarded in the first year of the plan, the Remuneration Committee must be
satisfied that there has been an increase in the earnings per share (EPS) of the
Company which is at least 4% per annum more than the increase in the retail
prices index during any period of three consecutive financial years within the
life of the grant. EPS is calculated as set out in the Statement of Investment
Practice No.1 of the Institute of Investment Management and Research as this is
a recognised method in the market. In addition, the Remuneration Committee
imposed a threshold of 20.8 pence as the minimum base year EPS before any such
increase could qualify towards meeting the performance condition. The
Remuneration Committee selected the performance condition because it is
challenging, aligned to shareholders interests and ensures awards only give
benefit to executives if they outperform their peers. Performance against the
condition is assessed by calculating EPS growth of the company to see if it
exceeds the minimum performance required. The threshold of 20.8 pence was first
introduced by the Remuneration Committee in 2000 because EPS in the financial
year ending March 31, 2000, was negative, the Committee having determined that
it would be inappropriate to attempt to measure EPS from a negative base year.
The threshold has been altered to reflect the adoption of FRS 19 'Deferred Tax'
which has the effect on a like for like basis of reducing the figure of 20.8
pence to 17.3 pence.
For further information regarding the Company's employee share schemes,
see Note 33 to the Financial Statements.
British Airways All Employee Share Ownership Plans
On July 11, 2000, the Company obtained shareholders approval to
implement any aspect of the new all employee share plans now known as share
incentive plans. The approval permits the Company to operate a partnership share
plan which would allow employees in the UK to buy shares from their pre-tax
salary and would allow the Company to give matching or free shares to those
participants in the share plan. Financial limitations would apply to any new
plan. The Company intends to launch the new plans when the commercial
environment is appropriate.
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