AUSTRALIA - The board of Telstra has refused to back down after the Future Fund voted against the generous pay packages offered to senior executives.
The Future Fund’s board revealed it had opposed the remuneration report put to shareholders at Telstra’s annual general meeting yesterday. The Future Fund holds 2.05 billion Telstra shares, representing 16.5% of the company's issued shares.
The report includes an incentive scheme for around 260 senior executives who become eligible for share options if they meet certain criteria, including returns exceeding 11.5% for four years running.
Telstra chief executive Sol Trujillo, whose package runs until June 2009, also has share options if he meets further, undisclosed hurdles, on top of a generous pay packet.
David Murray, chair of the Future Fund Board of Guardians, said the fund had held discussions with representatives from the Telstra board and given careful consideration to the resolution.
He said: “We are obliged to consider the report as a whole and believe that a critical principle in remuneration is that there is clear alignment between long-term equity based executive reward and returns to shareholders.
“We believe this principle is not sufficiently evident in the Telstra arrangements.”
However, the Telstra board is not bound by the vote and its chairman Donald McGauchie, said the board believed the remuneration plan was serving the long-term interests of shareholders by directly aligning executives’ remuneration with shareholder wealth and strong financial results.
He said Telstra was going through a transformation which was changing the competitive landscape. “[The remuneration plan] is designed to drive the transformation by linking executive remuneration to the success of the strategy.
“Ultimately, the Telstra board is prepared to be judged on how effectively the transformation strategy delivers shareholder value.”
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