After the Mayne game, it's time for Telstra board to kiss Cousins

In the end, Geoffrey Cousins' appointment to the Telstra board was virtually a case of one hand clapping. It was, of course, the federal Government's big hand and it held just 51.8 per cent of the votes which could be cast, so it was always a fait accompli.

But it should be a sobering thought for the Government that very few other shareholders supported the election of Cousins. In fact, the corporate gadfly Stephen Mayne received almost as many votes. Corporate governance bodies had supported Telstra's stance and recommended voting against Cousins.

Four retiring directors – Charles Macek, John Stocker, Peter Wilcox and John Zeglis – stood for re-election, along with five external candidates – Cousins, Mayne, Mervyn Vogt, Leonard Cooper and Ange Kenos.

The retiring candidates each received around 8.4 million votes for their re-election and between 30 million and 80 million votes against. Cousins received 6.68 million votes in favour of his election and 1.83 million votes against, which equates to 80 per cent for and 20 per cent against.

But the Government accounted for 6.44 million of those 'for' votes. If they are stripped out, then Cousins received only an additional 240 million votes.

That's the highest among the external candidates, but only just. Mayne received 187 million votes in favour of his election, while the other external candidates each received about 140 million votes.

Importantly, the vote against Cousins represented 15 per cent of the total capital, which is a significant protest vote and should send a strong message to Canberra.

The message is that investors disapproved of the Government foisting upon the board a director who was not of its choosing, particularly when it was a parting gesture. The Government is now in the final stages of its T3 share sale, with its residual holding to be tipped into the pollies' retirement fund, the Future Fund.

The episode demonstrated the inherent conflict the Government has had as both the party which determines the regulatory environment in which Telstra must operate and also as its controlling shareholder.

Telstra's US import Sol Trujillo and his management team upset the Government during the lead-up to and, for that matter, during the T3 sell-down process for its aggressive attack on the regulatory regime – including the cancellation of its proposed $3 billion high-speed fibre to the node broadband network. The board upset the Government by supporting Trujillo and his team.

So Prime Minster John Howard has retaliated by having Cousins voted on to the board. The Government defends its actions on the grounds that Cousins has the necessary qualifications and experience to serve on the board of a telco and that he will be an independent director, which is no doubt the case.

Cousins is well regarded and has had considerable experience in the media industry. And he demonstrated the courage of his convictions several years ago when he quit the board of Crown Casino over corporate governance concerns. It would be unfortunate if his new board colleagues treated him as the Man from Canberra.

The board had professed to adopt a neutral stance to ensure that it didn't pre-judge in any way whether Cousins would meet the company's requirements for an ``independent'' director. It also said several weeks ago that the board had commenced a process to assist it in reaching a conclusion on those issues.

But that has a hollow ring about it given that, seven weeks ago when the company gave notice of the annual meeting, it advised that any undirected proxies received by the chairman would be voted against the election of Cousins. There was nothing neutral about that stance.

Telstra chairman Donald McGauchie said yesterday that it normally took about six months to vet a board candidate – if that is so, it's a ridiculously long time and suggests that Telstra needs to do something about streamlining its process.

Telstra has warned that if Cousins cannot be considered an independent director, it could prove disruptive to the smooth and effective functioning of the board and jeopardise the company's ability to attract and retain qualified directors.

But Cousins is now on the board and – unless the other directors are prepared to pull on a board contest as Coles Myer did some years ago, and National Australia Bank did with Cathy Walters, and those episodes demonstrated just how disruptive board disputes can be – he is there for three years before he comes up for re-election.

Cousins and his fellow directors now need to put the manner of his election behind them and get on with life. In the absence of evidence to the contrary, he should be given the benefit of the doubt as to his independence. Hopefully that's exactly how it will be.

Copyright © 2022 The Mayne Report. All rights reserved

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