Public

Telstra (TLS) 2016 AGM Voting Intentions

Company/ASX Code : Telstra Corporation Limited (TLS)
Registry : Link Market Services
Poll/Show of Hands : Poll on all items
Webcast : Yes
Venue :
9.30am Four Points by Sheraton (Grand Ballroom)
161 Sussex Street
Sydney, New South Wales
Monitor : Mr Mervyn McDougal
AGM Details / NoM : Tuesday 11th October, 2016
ASA Position
Not Applicable
Items 1 & 2: Presentations and consideration of accounts and reports

Telstra increased total income in 2016 by 3.6% to $27.1 billion. Net profit after tax increased by 35.9% to $5.8 billion, including $1.8 billion from the sale of Autohome shares. A final dividend of 15.5 cents per share was paid, taking the total dividend for FY2016 to 31.0 cents per share, distributing some $3.9 billion to shareholders. In addition, Telstra will return a further $1.5 billion to shareholders through off-market and on-market buy backs. 

Despite the sound financial results, the series of network interruptions experienced in the second half of the year led to a decrease in overall NPS (Net Promoter Score), indicating that more needs to be done to restore customer satisfaction. As well as specific corrective measures previously announced, Telstra also advised of the commitment of up to an extra $3 billion over three years on new investments in networks and business initiatives designed to deliver significant customer benefits.

During 2016, two new non-executive directors were appointed – Craig Dunn and Jane Hemstritch, both of whom are up for election at the AGM. Chairman Catherine Livingstone also retired as Chairman and was succeeded by John Mullen in April 2016. 

Summary


ASA Position
For
Item 3(a): Election of Mr Craig Dunn as a Director

Mr Dunn was appointed a non-executive director on 12 April 2016 and was also appointed a Member of the Audit & Risk Committee. He is a highly regarded business leader with more than 20 years’ experience in financial services, pan-Asian business activities and strategic advice for government and major companies. Mr Dunn was CEO and Managing Director of AMP from 2008 to 2013. He has also served as a member of the Federal Government’s Financial System Inquiry in 2014 and the Consumer and Financial Literary Taskforce.  Mr Dunn is a director of Westpac and is actively involved in other government advisory groups. ASA supports the election of Mr Dunn.


ASA Position
For
Item 3(b): Election of Ms Jane Hemstritch as a Director

Ms Hemstritch was appointed a non-executive director on 12 August 2016 and was also appointed a member of the Remuneration Committee. She has extensive senior executive experience in information technology, communications, change management and accounting. During a 25 year career with Accenture and Anderson Consulting, Ms Hemstritch worked with clients across Australia, Asia and the US. She is a director of LendLease and Tabcorp Holdings, and is also a member of the Council of the National Library of Australia. ASA supports the election of Ms Hemstritch.


ASA Position
For
Item 3(c): Re-election of Dr Nora Scheinskestel as a Director

Dr Scheinkestel has been a non-executive director since August 2010 and was last re-elected in 2013. She is Chairman of the Audit & Risk Committee. Dr Scheinkestel is an Associate Professor in the Melbourne Business School at Melbourne University and a former member of the Takeovers Panel. She consults to government, corporate and institutional clients in areas such as corporate governance, strategy and finance. Dr Scheinkestel is the Chairman of Macquarie Atlas Roads and a director of Stockland Group. ASA supports the re-election of Dr Scheinkestel.


ASA Position
For
Item 4: Grant of performance rights to the CEO Mr Andrew Penn

Shareholder approval is sought for the proposed grant of performance rights to the CEO, Mr Andrew Penn, under the Telstra FY17 LTI Plan. Each performance right entitles the CEO to one fully paid ordinary Telstra share at the end of a three year performance period (1 July 2016 to 30 June 2019), subject to the satisfaction of certain performance measures with further trading restrictions until 30 June 2020. The CEO’s maximum opportunity is 200% of his fixed remuneration of $2,325,000.

The relevant hurdles are relative total shareholder return (TSR) and free cash flow return on investment. The relative comparison is based on a group of 20 large international telecommunications companies, which well exceeds ASA requirements that the comparator group contain a minimum of five such companies. In the 2016 year, the combined hurdles resulted in an LTI award of 53% of the maximum available which suggests that the hurdles are realistic. While ASA is urging companies to assess LTI awards over a minimum of four years, the extra 12 month trading halt imposed by Telstra effectively achieves this result. The fact that only 25% of the award is available at the 50th percentile is another reason for ASA to support this proposal.


ASA Position
For
Item 5: Adoption of Remuneration Report

The Remuneration Report is comprehensive and includes the actual take-home remuneration for the year as well as the statutory payments required by accounting principles. Telstra has included additional graphics which improve the readability of the report. 

There has been no increase in KMP base salaries or Directors’ Fees, which is encouraging. STIs are paid 75% in cash and 25% in equity. At last year’s AGM, we raised the suggestion that Telstra look at raising the equity share to 50% to more closely align with ASA policy. We raised the matter again, but note that Telstra does require KMP and directors to purchase equity over a time period, and we support and encourage these policies.



The individual involved in the preparation of this voting intention has a shareholding in this company. 


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