Telstra (TLS) 2015 AGM Report

Company/ASX Code : Telstra Corporation Limited (TLS)
Venue :
9.30am Grand Hyatt Hotel (Savoy Ballroom) Melbourne, Victoria
Monitor : Mr Mervyn McDougal
AGM Details / NoM : Tuesday 13th October, 2015
# of Attendees : 400+ shareholders and visitors
# Holdings represented by ASA : 2,900
Value of Proxies : $168 million
# Shares Represented by ASA : 30 million
Market Capitalisation : $68 billion

Remuneration Report draws sizeable protest vote

Chairman Catherine Livingstone opened the meeting by introducing the individual board members and those directors standing for re-election gave a short presentation on their qualifications and experience and outlined what they brought to the board. As a new nominee to the board, Ms Traci Vassalio also outlined her skills and experience and the contribution she expected to make to the continued growth of Telstra.

The Chairman ran through the performance highlights for the year, which included an increase in total revenue of 1.2% to $26.6 billion, and an increase in earnings per share to 34.5 cents, leading the board to declare a final dividend of 15.5 cents per share. This took the total dividend for the year to 30.5 cents per share, up 3.3% on the previous year. In a reference to recent publicity about multinational corporations paying low taxes, she pointed out that Telstra income tax paid last year represented some 2.5% of the total corporate tax received by the ATO.

In his presentation, new CEO, Andrew Penn, drew most attention to his advice that Telstra was currently considering its options for appealing last week’s ACCC decision to slash the price of access to Telstra’s copper network by 9.4%. Mr Penn said the decision on the cost at which Telstra’s competitors gain access to its network would wipe up to $80 million off Telstra’s revenue and earnings before interest, tax, depreciation and amortisation in 2015-16. Mr Penn’s claims received wide media coverage, with The Australian’s Stephen Bartholomeusz providing an analysis that was very supportive of Telstra’s position.

The Chairman then moved on to the re-election of directors. All were re-elected with strong support. Results were as follows: Mr Russell Higgins, 99.39% for; Ms Margaret Seale, 99.4% for; Mr Steven Vamos 99.69% for. The newly nominated Ms Traci Vassallo was elected with a vote of 99.63% for.

The Chairman then introduced the resolution calling for the grant of performance rights to the CEO. This resulted in several questions related to the possible use of options rather than rights, and the use of relative TSR rather than absolute TSR. The Chairman explained that the changes to the taxation treatment of options under a previous government had made the use of options complex and unattractive, while the inclusion of a range of international companies in the comparator group made that a more viable comparison in the board’s view. There was a 96.46% vote in favour of the grant of performance rights.

In a question on the Remuneration Report, the ASA asked that at the next review of the remuneration structure, the committee consider increasing the proportion of the STI to be paid in equity from the current 25% to the ASA preferred 50%. The Chairman replied that, in addition to the 25%, Telstra also required its senior managers to hold equity to at least the value of their annual fixed remuneration.

ASA voted all undirected proxies FOR all resolutions. The subsequent poll confirmed an 11% protest vote against the remuneration resolution.  ASA had, on balanced consideration of alignment with shareholder interests, voted in support. However, we have expressed our concerns to Telstra and will continue to press for greater alignment with ASA’s voting guidelines.