Failed BT chief Barrault walks away with £2.8m

Barrault quit BT abruptly at the end of October when it became clear that some of the contracts signed by the division were much less profitable than the company had previously estimated.

Dubbed BT's "growth engine", global services appeared to sacrifice margins to continue to write new business.

Its failure to deliver costs savings which BT had promised the City led to two profits warnings, contributing in large part to the group's loss of 134m in the year to 31 March.

BT's annual report, published yesterday, revealed that on top of the 1.25m paid in salary for working two thirds of the financial year, Barrault was given a severance payment of 1.6m when he left.

In a statement BT said the payment was in "strict accordance with his (Barrault's] contract" and that he received no bonus.

"We are disappointed to make the payment to Francois but BT honours its legal and contractual obligations," it said.

In contrast, Hanif Lalani, BT's former group finance director, who now heads the global service business, had asked not to be considered for a bonus, with none of the other staff in the division being paid bonuses during the year.

Chief executive Ian Livingston has been paid a reduced bonus of 343,000, which the Glaswegian will take in shares.

The bonus related to "non-financial elements" of his bonus scheme such as customer service, environmental and social measures, BT said in a statement, adding that this was 20 per cent of the theoretical maximum available.

No-one at BT was paid a bonus for its financial performance after it missed earnings per share and cashflow targets. It has also announced that no executives will be given pay rises this year.

Ben Verwaayen, the Dutchman who headed the company until last May, was given a termination payment of 700,000 when he left the company in May – equivalent to ten months' pay, along with a salary of 277,000 and a 300,000 bonus.

Yesterday's annual report also warned that BT may have to tap the markets for cash if the economy does not improve.

Setting out the risks facing the group, BT said a fall in business activity could lead to a loss in revenue and profits, and that the recession could lead to a rise in bad debts.

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.

A spokesman said the statement was "cautionary" and was not meant to be taken as guidance by the City.

Shares closed up 0.6p at 88.4p.