Despite an apology to shareholders, shares of Telstra Corporation Limited [ASX:TLS] continue to slip ahead of its AGM this coming Tuesday.
Telstra shares have lost nearly 5% over the past five trading sessions.
At issue is the way Telstra pays its executives.
In acknowledging the chairman of the board John Mullen said:
‘Some shareholders still feel that our remuneration outcomes were either not sufficiently transparent or resulted in higher payouts than shareholders felt were reasonable.’
Telstra chairman issues half-hearted apology for executive pay
And yet in comments released earlier, Mullen expressed some defiance over executive pay saying:
‘We believe that in challenging market conditions, motivating and incentivising management becomes even more critical to the future success of the business and maximising shareholder value.
‘[This] will inevitably mean that variable compensation may be paid even at a time of a poorly performing share price.’
In essence, Mullen is saying that executives may still take home big pays even if the company is doing poorly.
Telstra executive pay goes up while profits go down
Meanwhile the CEO, Andy Penn, is set to take home $4.5 million this year.
Its full year profit fell by 8.9%, and is facing difficulties as the NBN is rolled out.
Meanwhile a number of adviser firms have recommended against the company’s pay report, and investors have indicated a willingness to vote against it.
One such adviser said the following:
‘The overall EVP outcome for FY2018 … does not appear consistent with the company’s overall performance for the year, which was lacklustre in the face of ‘rapidly reducing’ margins stemming from the rollout of the national broadband network.’
If more than 25% of investors vote against it, it will trigger a ‘first strike,’ under laws passed in 2011. A second strike can trigger a board spill.
AMP and CommBank have both suffered a ‘first strike’ in the past two years.
Telstra could be in for a rocky AGM this coming Tuesday.
For Money Morning
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