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Despite piling on revenues, the group’s Global Services division has always been viewed with suspicion by shareholders. Building and running phone and data networks for multinational companies sounds simple enough, but BT failed to share many details on its performance other than pointing to a 15% margin target in the dim-and-distant future.

In the event, Global Services’ margin will be no more than 7%-8% this year and the target looks like being abandoned. Verwaayen’s growth engine is starting to look like excess baggage.

The real worry is that BT is not blaming economic decline for its woes. It simply hasn’t been able to take cost out of the division quickly enough. What will happen when the recession really bites?

Just as Brown can be partly blamed for the woeful prospects of the British economy, so too must Livingston bear some responsibility for Global Services’ failings. He was group finance director when BT was signing up its earliest corporate contracts, such as the outsourcing deal struck with Unilever, which observers think will be lucky to break even on current terms.

Outgoing Global Services boss François Barrault had the empire-building tendencies of former BT retail chief Pierre Danon without the required attention to detail. Livingston has some tough decisions to make. Juggling the urgent need for network investment, a dividend ripe to be cut in March and battling for broadband customers with Carphone Warehouse and BSkyB, BT needs to stop fighting on all fronts and scale back its ambition. Only then will it have enough headroom to carry on feeding the beast of a pension fund it is saddled with.

Sharing the pain

WHEN a chairman or chief executive buys shares in the company they run, it usually gives a clear signal that they believe in its long-term future. There is no such thing as perfect information in financial markets, but those who run the company are the next best thing.

However, such is the panic in the stock markets that the rule book in terms of valuing companies has been thrown out. Even after last week’s putative rally in equity prices, many directors are sitting on large losses from share purchases they have made over the past six months.

According to Digital Look, which monitors director share dealing, those who have bought shares to demonstrate their confidence in companies where they have become chairman are among the worst hit. Harvey McGrath is sitting on big losses at Prudential as is Mike Turner who on Friday took the top seat at Babcock International.

These individuals can sit it out and wait for the recovery. However, their wider concern is to ensure that they keep a top team round them. To retain them, performance packages will have to be realigned to today’s share price — and that will have to happen quickly.

john.waples@sunday-times.co.uk

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