With shareholders set to vote on the remuneration plan at next week’s annual general meeting, chairman John Mullen has written to shareholders defending multimillion-dollar packages as essential in attracting talented managers while acknowledging Telstra had erred.
The telecommunications giant had cut bonuses following a year in which full-year dividend fell almost 30 per cent and profit dropped 8.4 per cent.
“Some shareholders still feel that our remuneration outcomes were either not sufficiently transparent or resulted in higher payouts than shareholders felt were reasonable,” Mullen said in a letter published on the ASX on Thursday.
“With hindsight, we recognise we perhaps did not provide enough transparency around some of the metrics that we adopted to measure management performance and the reasons as to why these were chosen. For this we apologise.”
Telstra, which announced in June it would slash a quarter of its workforce, sell off $2 billion in assets and break off its fixed network infrastructure as a new business, also fleshed out details of the overhauled executive remuneration plan that replaces short- and long-term incentives with a single variable payment.
Mullen said Telstra’s executive variable remuneration plan meant executives could meet targets even while Telstra’s share price performed poorly.
“As a board we are deeply disappointed that some shareholders are critical of our FY18 EVP outcomes,” Mullen wrote.
“However, we acknowledge the criticism and hope that this communication goes some way to explaining the reasons why we still believe that our EVP is the right structure to align management incentives with shareholder interests.”
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