BT came under attack yesterday when it handed its new chief executive a large bonus even though he missed all financial targets and waved off the head of its failing IT unit with a £2.85 million package.

The telecoms group, which recently announced plans to cut a further 15,000 jobs after plunging into the red, said Ian Livingston remained in line for £686,000 in bonus payouts because he had met “social and environmental” targets.

Although he failed to meet a single financial target, the group claimed that he had made significant steps in boosting customer service, cutting network faults and reducing customer complaints.

The reward, half of which is not payable until August 2012, complies with a preapproved bonus formula under which 40 per cent of BT’s executive bonuses are paid out for “nonfinancial” elements.

However, it is expected to infuriate unions and the thousands of staff who have been sacked from the group after its recent purge. BT’s workforce fell from 162,000 to 147,000 in the year to March, 5,000 more than predicted, with the extra cuts largely among agency staff.

A BT spokesman said: “Customer service is one of Ian’s top priorities and so it is appropriate there are bonuses to reflect the best customer service improvements in years. Environmental, social and governance measures are also important for the long-term health of the company and that is also reflected in the bonuses.”

Mr Livingston, who took over from Ben Verwaayen last year, was awarded an annual bonus of £343,000, which has been converted into shares. A further £343,000 bonus payout is set to be paid in three years, dependent on him still being with the group.

Mr Verwaayen left the group with a £700,000 payout and a £300,000 bonus last June.

Corporate governance experts said that while it was down to companies to decide on the extent to which nonfinancial measures dictated bonuses, they would need to be prepared to justify such payouts.

BT’s annual report also revealed that François Barrault, who resigned in November after a profits warning at the global services unit he led, left with a £2.85 million package including a £1.6 million “termination” payment. BT conceded it was “disappointed” to make the payment but said it was obliged to fulfil its contractual obligations.

Andy Kerr, deputy general secretary of the Communication Workers’ Union, said: “François Barrault’s payout is outrageous. He is being rewarded for failure.”

As the recession has kicked in, boardroom remuneration has come under increasing scrutiny. BT, whose shares last October hit their lowest level since flotation, had sought to head off any anger over remuneration by announcing an executive pay freeze. It also confirmed yesterday it has a “clawback clause” under which unvested share awards that it feels are no longer warranted can be taken back.

Hanif Lalani, the new head of global services, has also said he should not be considered for a bonus this year. BT’s annual meeting will be held on July 15.

Earlier this month BT said that it would reduce the company’s full-year dividend by 59 per cent to 6.5p a share. It also announced plans to increase its pensions payments from £280 million to £525 million a year in an attempt to help plug a yawning deficit of £4 billion in BT’s pension fund.

Ring tones

— BT says it is the world’s oldest telecommunications company, with origins dating back to 1846

— Its predecessor, the General Post Office, became Britain’s monopoly supplier of the telephone service in 1912

— In October 1969 the GPO became a public corporation split into two divisions: post and telecoms

— In 1981 British Telecom became a separate company and other operators were permitted to enter the market

— A year later the Government decided to privatise British Telecom

— In April 1991 the company was renamed BT, with a new logo and structure

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