BT : Governance report 2022

Corporate governance report

We are committed to delivering on our ambition to be the world's most trusted connector of people, devices and machines. We are focused on growing sustainable value for our stakeholders and the communities we operate in, through effective Board leadership, strong corporate governance and building the strongest foundations.

Compliance with the 2018 UK Corporate Governance Code (the Code)

In respect of the year ended 31 March 2022, BT Group plc was subject to the Code, which was published by the Financial Reporting Council (FRC) in July 2018 (available at frc.org.uk). BT Group has applied all the principles and complied with all the provisions of the Code throughout the year:

*  Further details on the split of responsibilities of the Board can be found on our website bt.com/governance

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Contents

Chairman's governance letter		72
Our governance framework		73
Board leadership and company purpose
•	Board of directors and division of responsibilities	74
•	Role of the Board		76
•	Board focus in FY22		77
•	The Colleague Board and Board engagement
	with colleagues		80
Section 172 statement		82
Board composition, succession and evaluation
•	FY22 Board and committee evaluation	84
•	Board induction		85
•	Nominations Committee chair's report	86
Audit, risk and internal control
•	Audit & Risk Committee chair's report	89
BT Compliance Committee chair's report	96
Digital Impact & Sustainability Committee chair's report	97
Report on directors' remuneration
•	Remuneration Committee chair's letter	98
•	Focus on remuneration		101
•	Annual remuneration report		104
•	Remuneration in context		112
Statement of directors' responsibilities		114
Report of the directors		115
1. Board leadership and company purpose
A: Leadership, long-term sustainable success, generating
	value for shareholders and contributing to wider society	30-35,
	66-69,72-76, 97
B: Purpose, values, strategy and culture	72, 76-78,82-83, 87, 93, 97

C: Resources and prudent and effective controls 44-45,55-57, 78, 83,

	92, 97
D: Effective engagement with stakeholders	36-41, 72, 80-81, 97
E: Workforce policies and practices	24-25, 42, 78, 80-81, 93
2. Division of responsibilities
F:	Leadership of the chairman*		72, 74, 76, 88
G:	Board composition and clear division of responsibilities*	73-76, 84

1. Role and time commitment of non-executive directors 74-76, 87, 111
2. Policies, processes, information, time and resources,

and support of the company secretary

73, 74, 76, 87-88

3. Composition, succession and evaluation

1. Board appointment process and effective succession planning 85-88
2. Board and committee skills, experience and knowledge 74-75,87-88

L: Annual Board and individual director evaluation

84, 88

4. Audit, risk and internal control

M: Independence and effectiveness of internal and external audit

functions	93-95
N: Fair, balanced and understandable assessment of company's
position and prospects	78, 90, 114
O. Procedures to manage risk, oversee internal control framework
and determine nature and extent of principal risks	55-57,89-95, 116
5. Remuneration
P: Remuneration policies and practices	101
Q: Procedure for developing policy on executive, director and
senior management remuneration	98-113
R: Independent judgement and discretion in
remuneration outcomes	99, 102, 105

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Chairman's governance letter

I would like to thank my predecessor, Sir Jan du Plessis, for the support and guidance he gave me before I became chairman on 1 December 2021.

The Board recognises the value of having strong corporate governance at the centre of our decision-making on how we generate long-term sustainable value for all our stakeholders, including investors, colleagues, customers, regulators, suppliers, the Government and the communities in which we operate. A key area of focus for the Board is oversight of the execution of our transformation agenda, which seeks to create a simpler, more efficient and dynamic BT Group. Our colleagues and culture are integral to our ability to successfully deliver on this agenda and to the future success of the group. This year we launched 'Being trusted: our code', to guide colleagues into behaving in the right way, supporting our ambition to be the most trusted connector of people, devices and machines.

This corporate governance report sets out our approach to governance and how it supports our strategy, the Board and its committees' key focus areas during the year and the decisions we have made, whilst considering the interests of our stakeholders and our contribution to society.

Board changes

In addition to Jan's retirement from the Board on 30 November 2021, Mike Inglis stepped down from the Board at the conclusion of the 2021 AGM and Leena Nair will step down at the conclusion of the 2022 AGM. I'd like to thank Mike and Leena for their contribution to the Board and to the BT Group. From the conclusion of the 2022 AGM, Sara Weller will succeed Leena as chair of the Digital Impact & Sustainability Committee.

The primary focus of the Nominations

Committee during 2021 has been the search for a new chairman, culminating in my appointment.

As part of ongoing succession planning and in light of the tenure of our longer serving non-executive directors and the changes to the Board over the last few years, I have undertaken a comprehensive review of the Board's composition in line with the group's strategy and the opportunities and challenges we face, to examine how we can strengthen

the Board for the future (see page 86). Reflecting on this review and feedback from the FY22 Board and committee evaluation, it is recognised that we need to enhance the Board's technology and digital capabilities given the group's focus on digital and legacy platform transformation. We are therefore in the process of searching for additional non-executive directors, with at least one director with digital and technology capabilities and transformation expertise. Having a diverse Board, as set out

in our Board Diversity and Inclusion Policy, is a priority and therefore, a key element of any search brief.

Diversity and inclusion

The development of a diverse and inclusive organisation is central to our people strategy and is embedded within the inclusive pillar of our Manifesto, which we launched in December 2021. The Board's commitment to diversity and inclusion and the related targets are set out in our Board Diversity and Inclusion Policy (see page 87). Our Board currently comprises 36% female directors, two directors from an ethnic minority background, and one who has a disability. The Board is cognisant that Leena's departure will reduce the female membership of the Board from 36% to 27%, which is below our own Board Diversity and Inclusion Policy targets.

This will be addressed as part of our search for additional non-executive directors as a priority and in any event within FY23.

Stakeholders

The Board values its engagement with all our key stakeholders, including shareholders, and we continue to ensure that our mechanisms are effective in enabling the continuous flow of information between the Board, senior management and the wider organisation. Details of our engagement with stakeholders during the year

and the impact of this engagement on the Board's decision-making process can be found on pages 36 to 41 and 80 to 81 and in our Section

172 statement on pages 82 and 83.

Since my appointment, I have met with a number of our top investors to gain an understanding of their views.

The first cohort of the Colleague Board has strengthened the voice of our colleagues at Board-level and provided the Board with valuable insights into colleague sentiment through Isabel Hudson in her role as the designated non-executive director for workforce engagement. We built on this success and appointed the new cohort of members for their two-year term at the start of 2022 (see pages 80 and 81).

We have a diverse range of customers with different needs, and meeting these needs effectively is key to our success in delivering on our strategy, ambition and purpose (see pages 18 and 19). As part of our Board-level oversight of consumer fairness, from April 2021, the Board decided to widen the remit of the BT Compliance Committee to monitor how we are living up to the Consumer Fairness principles (see page 96).

Evaluation

This year, we undertook an internal Board and committee evaluation, the results of which demonstrate that the Board as a whole continues to be effective and seeks to constructively challenge and support management. We have agreed on a set of actions to strengthen how we operate for the future (see page 84).

I would like to thank my fellow Board members and the Executive Committee for their warm welcome and efforts this year.

Adam Crozier

Chairman

11 May 2022

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Our governance framework

The Board

Responsible for the stewardship of the group, overseeing its conduct and affairs to deliver on our strategic objectives and creating long-term success to generate sustainable value for our shareholders and the interests of other stakeholders. The Board has established certain committees to assist it in discharging its responsibilities and delegates day-to-day responsibilities to the chief executive.

Board leadership and company purpose on page 76 to 79

Audit & Risk Committee Oversees, assesses and reviews our financial and narrative reporting, internal controls and risk management. This includes internal and external audit and pan-BTfinance, control and compliance- related transformation programmes.

Audit & Risk Committee chair's report on pages 89 to 95

Nominations Committee Considers the structure, size and composition of the Board and its committees and advises on succession planning for the Board and the Executive Committee.

It ensures the Board is diverse,

with the appropriate balance of skills, experience, independence and knowledge.

Nominations Committee chair's report on pages 86 to 88

Remuneration Committee

Agrees the remuneration framework for the chairman, executive directors and certain senior executives and monitors remuneration practices and policies for the wider workforce.

Remuneration Committee chair's letter and Report on directors' remuneration on pages 98 to 100

BT Compliance Committee	Digital Impact & Sustainability	Colleague Board
Oversees our adherence to the	Committee	Discusses and provides advisory
Commitments we made as part of	Provides oversight and direction to	feedback on key proposals and
the 2017 Digital Communications	bring the Manifesto to life through	initiatives impacting our colleagues
Review (DCR) with Ofcom and	our digital impact and sustainability	and flags any hot topic areas raised
adherence to consumer fairness	strategy.	by them. Our designated non-
principles.		executive director for workforce
		engagement reports back to the
		Board on its activities.

BT Compliance Committee chair's report on page 96

Digital Impact & Sustainability Committee				Colleague Board on pages 80 and 81
chair's report on page 97

Investigatory Powers Governance Committee

Oversees our role in the use of official investigatory powers.

Chief executive

Responsible for running the business and setting and executing the group strategy.

Executive Committee

Assists the chief executive to develop and execute the group strategy and budget, and monitors overall performance and how we're managing risks.

BT Investment Board Provides input and recommendations that support the chief executive's decision-makingon investment budgets and cases.

Disclosure Committee Ensures BT Group meets its disclosure obligations and reviews and approves regulatory and other announcements before publication.

Matters reserved to the Board and its committees' terms of reference can be found on our website at bt.com/governance

Each committee chair formally reports to the Board following their meetings and makes any recommendation to the Board in line with that committee's terms of reference.

Papers and minutes are circulated to all Board and committee members as appropriate, other than to those with a potential conflict of interest. Deutsche Telekom's nominated representative owes a fiduciary duty to both BT Group and Deutsche Telekom. The Conflicted Matters Committee reviews all papers ahead of sharing these with him to identify potential or actual conflicts of interest.

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Board of directors and division of responsibilities

Membership key

Committee chair

Audit & Risk Committee

BT Compliance Committee

Colleague Board

Digital Impact & Sustainability Committee

Executive Committee

Investigatory Powers Governance Committee

Nominations Committee Remuneration Committee

Adam Crozier

Chairman

Appointed chairman in December 2021 and to the Board and as chairman designate in November 2021.

Age: 58

Experience

Adam was previously chairman of ASOS, Stage Entertainment BV and Vue International Cinema Group, and a non-executive director of Sony Corporation. He has had over 20 years' experience as a CEO across four different industries, most recently as the CEO of ITV from 2010 to 2017. Before joining ITV, Adam was chief executive of Royal Mail, where over seven years he led its modernisation and transformation. Prior to Royal Mail he was CEO of the Football Association between 2000 and 2002 and Joint CEO of Saatchi & Saatchi from 1995 to 2000.

Relevant skills and contribution to the Board

Significant experience in leading public company boards, developing teams and managing stakeholders and brings a strong transformational and operational track record in large-scale executive roles. He has also built a strong track record in turning around troubled organisations and in building and leading successful management teams.

External appointments Chairman of Whitbread and Kantar Group.

Philip Jansen

Chief executive

Appointed chief executive in February 2019 and to the Board in January 2019. Age: 55

Experience

From April 2013 until joining BT Group, Philip was CEO of Worldpay. Before that he was CEO and then chairman at Brakes Group between 2010 and 2015. Philip spent the previous six years at Sodexo where he was group chief executive, Europe, South Africa and India. Prior to that he was chief operating officer at MyTravel Group from 2002 to 2004 and managing director of Telewest Communications (now Virgin Media 02) from 2000

to 2002 after initially starting his career at Procter & Gamble.

Relevant skills and contribution to the Board

Extensive experience of leading and growing large private and publicly listed UK and international businesses, delivering transformational change and large technology programmes.

External appointments

Senior advisor at Bain Capital and trustee of Wellbeing of Women.

Simon Lowth

Chief financial officer

Appointed chief financial officer and to the Board in July 2016.

Age: 60

Experience

Simon was CFO of BG Group before its takeover by Royal Dutch Shell in February 2016. Prior to that, he was CFO of AstraZeneca from 2007 to 2013. He was an executive director of ScottishPower from 2003 to 2007 having been appointed as the finance director in 2005. Before 2003, Simon was a director of McKinsey & Company.

Relevant skills and contribution to the Board

A strong background in finance, accounting, risk, corporate strategy and mergers and acquisitions. Simon has experience and a track record of implementing cost transformation and performance improvement programmes.

External appointments

None.

Our directors share collective responsibility for the activities of the Board. There is a clear division of responsibilities between the chairman and the chief executive as required under the Code. The responsibilities of the chairman, chief executive, chief financial officer and senior independent director and other key roles within BT Group, along with the matters reserved to the Board, are set out on our website at:

bt.com/governance

Isabel Hudson

Independent non-executive director and designated non-executive director for workforce engagement

Appointed to the Board in November 2014.

Age: 62

Experience

Isabel was previously non-executive chair of National House Building Council until May 2020. She was also previously senior independent director of RSA Insurance, non- executive director of The Pensions Regulator, MGM Advantage, QBE Insurance, Standard Life and an executive director of Prudential Assurance Company in the UK.

Relevant skills and contribution to the Board

A wealth of experience in financial services, in the life, non-life and pensions industries as well as risk, control, governance and international business. Insight and expertise in regulatory, pensions and financial matters.

External appointments Non-executivedirector and chair of the audit committee of Axa S.A. and an ambassador for the disability charity, SCOPE.

Matthew Key

Independent non-executive director

Appointed to the Board in October 2018.

Age: 59

Experience

Matthew held various positions at Telefónica from 2007 to 2014 including as chairman and CEO of Telefónica Europe and chairman and CEO of Telefónica Digital. From 2002 to 2004 he was the CFO, strategy and regulation director of O2 UK before becoming CEO in 2004. Matthew previously served as finance director at Vodafone UK and chairman of Tesco Mobile. He has previously held positions at companies including Kingfisher, Coca-Cola and Schweppes Beverages, Grand Metropolitan

and Dallaglio Rugbyworks.

Relevant skills and contribution to the Board

Strong strategic skills and a wealth of experience in finance and the telecoms sector.

External appointments

Non-executive director and audit committee chair of Burberry.

Allison Kirkby

Independent non-executive director

Appointed to the Board in March 2019. Age: 54

Experience

Allison was appointed President & CEO of Telia Company in May 2020. She was previously President & Group CEO of TDC Group until October 2019, and President & Group CEO of Tele2 AB from 2015 to 2018, having been Tele2 AB's Group CFO from 2014. She was chair of the audit committee and a non-executive director of Greggs until May 2019. She has also held financial and operational roles within 21st Century Fox, Virgin Media, Procter & Gamble and Guinness.

Relevant skills and contribution to the Board

Strong and recent experience in finance and the international telecoms and media sector, combined with strong experience in driving performance, improving customer service and delivering shareholder value.

External appointments President & CEO of Telia Company.

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Adel Al-SalehNon-independent, non-executivedirector

Appointed to the Board in May 2020. Age: 58

Experience

Adel has been chief executive officer of T-Systems International GmbH (a subsidiary of Deutsche Telekom AG) since 2018 and is a member of the Management Board of Deutsche Telekom AG. Adel was chief executive officer of Northgate Information Solutions from 2011 to 2017, and before that held a variety of posts at both IMS Health (now IQVIA) and IBM.

Relevant skills and contribution to the Board

Significant experience in managing global technology companies, enterprise transformation and digitalisation.

External appointments Member of the Boston University, College of Engineering Advisory Board.

Leena Nair

Independent non-executive director

Appointed to the Board in July 2019. Age: 52

Experience

Leena was appointed Global CEO of Chanel in January 2022. She was previously chief human resources officer at Unilever from 2016 to 2022, where she was responsible for Unilever's global people agenda, working across 160 markets to help deliver Unilever's business financial performance as well as its environmental and social impact objectives. Leena joined Unilever in 1992 and has held a wide variety of HR roles throughout her career, including senior vice president for leadership and organisational development and global head of diversity, executive director of Hindustan Unilever and vice president HR South Asia. Leena was previously

a non-executive director at the Department for Business, Energy and Industrial Strategy until December 2020.

Relevant skills and contribution to the Board

A deep understanding of the strategic and practical challenges of driving large-scale cultural transformation.

External appointments

Global CEO of Chanel.

Sir Ian Cheshire

Independent non-executive director

Appointed to the Board in March 2020. Age: 62

Experience

Ian was chairman of Barclays Bank UK until December 2020 and a non- executive director of Barclays until May 2021. Ian was also previously group chief executive of Kingfisher and senior independent director and remuneration committee chair of Whitbread. Ian held a variety of posts whilst at Kingfisher from 1998 to 2014, including chief executive of B&Q from 2005 to 2008 and group chief executive from 2008 to 2014. He was also previously the chairman of Debenhams and the lead non- executive director for HM Government and former chairman of the Corporate Leaders Group on Climate Change.

Relevant skills and contribution to the Board

A wealth of listed company experience, with a notable background in strategy, international retail and eCommerce.

External appointments

Chairman of Channel 4 and Spire Healthcare Group. Also chairman of Menhaden Resource Efficiency, a UK investment trust.

Sara Weller

Independent non-executive director

Appointed to the Board in July 2020. Age: 60

Experience

Sara's previous roles include managing director of Argos and various senior positions at J Sainsbury, including deputy managing director and serving on its board between 2002 and 2004. Sara was a non- executive director of Lloyds Banking Group until May 2021 and United Utilities Group until July 2020. She was also the lead non-executive director at the Department for Work and Pensions until April 2020. She has also previously been a non-executive director of Mitchells & Butlers and held senior management roles at Abbey National and Mars Confectionery.

Relevant skills and contribution to the Board

A broad perspective coming from a background in retail, fast moving consumer goods and financial services, as well as strong board experience at both executive and non-executive level.

External appointments

None.

Iain Conn

Senior independent non-executive director

Appointed to the Board in June 2014. Age: 59

Experience

Iain was group chief executive of Centrica for over five years from 2015 to 2020. Prior to that, Iain spent 29 years at BP and was a board director for ten years from 2004 to 2014 including as chief executive Downstream from 2007 to 2014, and a member of the executive committee from 2002 to 2014. Until May 2014, Iain was a non- executive director of Rolls-Royce for nine years and senior independent director. Iain also served as a member of Council of the Imperial College from 2010 to 2019 and was chairman of the advisory board of the Imperial College Business School from 2004 to 2020.

Relevant skills and contribution to the Board

Deep experience in the global energy markets, industrial operations, regulated consumer markets, and in finance, technology and engineering. Broad international experience.

External appointments

Senior adviser to Blackstone on energy, infrastructure and sustainability and to the Boston Consulting Group. Adviser to Oxford Sciences Enterprises. Advisory Board member of Columbia University Center on Global Energy Policy.

Sabine Chalmers

General counsel,

company secretary & director regulatory affairs

Sabine joined BT Group in April 2018 as general counsel and was appointed as company secretary in September 2021.

See page 9 for Sabine's full biography.

BT Group plc  Annual Report 2022