Mullen's Stand On Pay May Not Be Able To Hide Telstra's Broader Problems

  • Oct 17, 2018 AEDT
  • Team Kalkine
Mullen's Stand On Pay May Not Be Able To Hide Telstra's Broader Problems

During Telstra’s AGM held on Tuesday i.e. October 16, 2018, at the Hilton in Sydney, there were moments when chairman John Mullen seemed frustrated. Even though the scheme has not changed, some of the same shareholders who voted for our variable remuneration scheme, last year voted against it, the former Asciano boss said to the 600 or so assembled attendees in his address.

The substitute advisors who were fine with combined scheme last year are now not happy with the same. At a renumeration report on Tuesday, Telstra faced a first strike and a huge 62 percent votes cast opposed pay for top executive of the shareholders. And Mr. Mullen said it did not make sense.

Against a top 20 company since the so-called first strike, the vote represents one of the biggest criticisms, came into place in 2011. However, back in 2007, 66 per cent of voting shareholders voted against led by the Future Fund and technically it's not actually the biggest protest vote Telstra has faced. 

The vote for protest is also entirely symbolic, it is not binding, a 25 percent vote against the remuneration report next year, and it would require another strike. To force another vote to tumble the board it would require another strike. At that stage the company will be truly in an unparalleled territory, and directors anyway might be reelected.

It’s not the retail investors but the big institution who dominate voting and use it to send a message to the companies. Citing the fact to all directors up for reelections were waived through, the vote against was a rejection of Telstra's broader strategy.

T22 turnaround plan was unveiled in August 2018, which involves cost cuts totaling $2.5 billion and job cuts 8,000 and simplifying consumer offerings. In great depth with investors, Mullen said they have socialized the T22 strategy, and it seems to be well received.

From last financial year compared to the $5.6 million a year ago, Mr. Penn received a bonus of $4.6 million. He was paid almost as much in bonuses as he was in base salary, in a period when Telstra struggled, however, the company cut its dividend and the shares seem to fall sharply. Some genuinely interesting points about executive pay raise were brought by the Telstra Chairman’s comments.

Heavily influenced by external consultants the formulas used to pay them are too complex and don’t seem to be driving the outcomes shareholders desire. When David Thodey was paid $14.5 million nobody seemed to have a problem and even the shares were riding high in 2015.

One of the protestors wrote on the sign that the executives earn 200 times the salary I earn, imagine the aftermath if this was the case if it had happened in 2015. The mobile market is hyper-competitive, and the NBN is undeniably having a detrimental impact on its business. Telstra had not seen this coming and that is the reason why the shareholders are so upset.

Telstra’s stock price declined 0.326% as at October 17, 2018 at the close of business hours, to trade a market price of $3.060. 

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