Shares of Telstra Corporation Limited [ASX:TLS] are down 4.09% in the past two days of trading. This comes after the company released a letter yesterday morning addressing shareholders frustration over executives’ pay.
Despite implementing the ‘Telstra 2022’ strategy, the telco giant’s share price is still down 10.89% in the past 12 months.
The recent concern for shareholders is that despite a year of a falling share price, dividend payout and profit along with mass job cuts, executives are still receiving huge bonuses.
Shareholders disappointment in Telstra’s remuneration plan
The letter acknowledged shareholders criticism, but justified its actions saying that:
‘It is important that the Board ensures that we continue to have competitive remuneration practices in place to attract and retain the talent required to deliver on our ambitious and market leading strategy, especially if such talent is sourced from overseas as is often necessarily the case.’
Despite this, Telstra apologised to shareholders and announced that executive bonuses will be cut by 30%.
‘We recognise that despite this action by the board, some shareholders still feel that our remuneration outcomes were either not sufficiently transparent or resulted in higher payouts than shareholders felt were reasonable.
‘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.’
What to expect next?
With some shareholders still not satisfied with the 30% cut, there is potential for Telstra to face a protest vote against its remuneration plan at its annual general meeting next week.
Although, John Mullen — Telstra’s Chairman — said that motivating and incentivising management in challenging market conditions is critical to the future of the business.
‘For the board this means that we will set targets for management that we think are ambitious and deliver lasting value to shareholders despite the market environment. The achievement of these targets will inevitably mean that variable compensation may be paid even at a time of a poorly performing share price.’
How the share price moves in the lead-up to the annual meeting, we’ll be able to judge whether shareholders agree with Mr Mullen or not. Investors will be keeping a close eye on Telstra stock over the next few days of trading.
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