Telstra is considering an overhaul of how it calculates executive bonuses after suffering a first strike from shareholders opposed to its remuneration report.
More than 60 per cent of investors voted against the communication giant’s remuneration report at Tuesday’s annual general meeting, raising the prospect of a board spill in 12 months if it doesn’t address widespread unhappiness among shareholders.
If more than 25 per cent of shareholders vote against the remuneration report at next year’s AGM, it would constitute a second strike and trigger a forced spill.
Chairman John Mullen told Tuesday’s meeting that there could be merit to replacing complex remuneration calculations with a traditional payment structure such as half cash, half shares locked in for five years.
“Maybe there is a case for doing away entirely with all these complex schemes and just go back to a fixed salary commensurate with the difficulty of the role,” he said.
“The AGM would be over in half the time.”
Mr Mullen admitted executive salaries are too high “across the board” but said he was disappointed with the rejection of a plan that cuts bonuses by 30 per cent for a year in which dividends fell nearly a third.
He said he understood some shareholders still felt the bonuses were too high, but blamed a broader corporate culture in which executives are generously rewarded in other industries.
“I personally believe that executive salaries are too high across the board, but changing this takes time and needs to be embraced by all of corporate Australia not just one company or one industry, as the marketplace for talent is international and is industry agnostic,” Mr Mullen said.
Mr Mullen said Telstra’s two most recent chief executives had received lower salaries than their predecessors – and that was likely to continue when Andy Penn eventually steps down.
“The bottom line is that it would seem that, for many shareholders, if they see the value of their shares diminish, then they consider management has performed badly and should not receive any of their variable compensation,” he said.
“The issue here is clearly the outcome not the scheme, and this means that we can make all the changes we like to the scheme and we will never please everybody.”
Mr Mullen said 2018/19 will be another difficult year for Telstra but urged shareholders to hold tight.
In June, Telstra announced it would axe 8,000 jobs.
Unions NSW secretary Mark Morey questioned why executives were pocketing millions in bonuses while workers face unemployment.
“It’s about executives taking enormous pay bonuses while they’re obviously contracting out the workforce, increasing job insecurity and not investing in a workforce that can deliver to Australian businesses and Australian families,” he said.
Telstra shares were down 1.6 per cent at $3.05 at 1458 AEDT.