BT shareholders angry over handling of Italian accounting scandal
Shareholders vented their anger at BT on Wednesday over the handling of a costly Italian accounting scandal that wiped billions off the telecom giant's market value.
A key resolution that was meant to green-light the accounts, director reports and auditor for the year was rejected by nearly a fifth of the votes cast at the company's annual general meeting, with 18.5% or 1.2 billion in opposition, and 240 million withheld.
More than 5.4 billion votes were cast in favour, passing the resolution by 81.49%, but that total fell short of the support enjoyed in recent years including 2016 when it passed with 99.97%.
Investors were airing their grievances over the Italian accounting debacle which resulted in a £530 million write-down and a major fall in its share price, knocking £8 billion from BT's market value.
BT bosses used the AGM to express "regret" over the scandal but tried to assure shareholders that they had taken "proportionate" action in its wake.
"This has been a very difficult year for BT, when we've had to deal with a number of issues, some within and some outside our direct control," chairman Sir Mike Rake said in his opening speech.
"These have had an impact on our short term performance and on our share price and we very much regret the impact they have had on your company."
Sir Mike said the company had immediately suspended the previous Italian management, who have left the business and are being investigated by Italian authorities, while chief executive Gavin Patterson and outgoing finance boss Tony Chanmugam were stripped of their annual bonuses.
An independent investigation was also conducted by KPMG - who will step in as BT's new auditors in the wake of the scandal, ending BT's 30-year relationship with PwC.
But BT's use of PwC services until 2018 sparked a backlash among investors, with 21.15% of votes cast against the accounting giant's reappointment, versus 78.85% in favour.
The Italian fraud case has weighed on the group's finances, contributing to a 19% drop in annual profits to £2.3 billion, compounded by a £342 million Ofcom fine and related compensation payments.
One shareholder said there were "a number of flawed areas" in the company, but highlighted a "lack of confidence" in BT's ability to resolve cases like the "Italian job", and asked the board to "clearly state and clarify why nobody has taken responsibility for these issues".
But shareholders continue to back BT's chief executive, with 98.47% casting votes in favour of Mr Patterson's re-election.
Mr Patterson said he had not worried about keeping his own position in light of the scandal.
"I think shareholders understand that Italy, for example, is a very unfortunate situation and one that we are extremely angry about still. But it was a very sophisticated fraud and we've acted swiftly to address the situation," Mr Patterson told reporters after the AGM came to a close.
"I feel very confident of shareholders' support and the vote today is consistent with every conversation I've been having with shareholders over the last six months."
Mr Patterson told shareholders on Wednesday: "This has been a disappointing and humbling series of events which we have addressed with urgency.
"I am determined that these issues will not reoccur and they will not distract me or your management team from continuing to deliver progress and success elsewhere in the organisation."