Dear Mayne Reporters,
The Telstra AGM has traditionally been a very long affair and today was no exception, largely because there was a record two hours and 8 minutes of presentations before the first shareholder was introduced to ask a question at 12.08pm.Listen to
chairman Donald McGauchie defend this record filibustering performance at an Australian public company AGM and check out the 36 presentation slides.
That said, CEO Sol Trujillo is clearly a world class CEO and a first rate presenter, which partly explains why a whopping 1091 people registered to attend proceedings at the John Batman Theatre in the Melbourne Convention Centre.
By all means unleash Sol Trujillo for an hour, but shareholders did not need a 35 minute introduction from the loquacious and combative Donald McGauchie and their patience was really tested when Charles Macek also delivered a 15-minute speech in his role as chairman of the remuneration committee.
Throw in another 15 minutes of answers to pre-submitted questions and we were into the afternoon before the debate had begun and by 12.30pm more than half the attendees had already left and were tucking into the lunch. They were the lucky ones because Telstra only catered based on the 600 who attended last year's AGM in Sydney, so there was no food left for those who stuck it out until the conclusion at 1.34pm after the relatively meagre 1 hour and 26 minutes of debate.
Telstra spinners later claimed each shareholder ate double the normal catering company allocation. Don't they know by now that most people only turn up to AGMs for the free lunch?
The Telstra AGM ran for 3 hours and 34 minutes which was 6 minutes shy of the season record of 3 hours and 40 minutes put on by the Commonwealth Bank last week. Both companies ran out of food, so it is clear that AGM attendances have risen dramatically as the sharemarket has tanked. Shareholders in widely held and supposedly strong big cap stocks want direct reassurance from their boards that everything is okay. Which it isn't, of course, with the sharemarket now down 52% since November 1 last year.Unionists make a splash maquarading as humble shareholders
For the minority who stuck around for the debate today, few realised that the ACTU put on a co-ordinated but measured push on issues that focused around the national broadband network, executive pay, board tenure and staff engagement. The union movement has been motivated by Telstra's decision to by-pass the unions and deal directly with their staff.
The ACTU held a press conference before the AGM started pushing the point that staff are conducting a ballot which contemplates the first strike action at Telstra in 10 years. Read the transcript here.
"Bert Blackburn from Carlton", "Ben Hillier from Fitzroy", Jessie Gillies from Richmond" and "Peter Solomon from Flemington" were all introduced as humble shareholders inside the AGM and together this quartet managed to get through most of the following seven ACTU questions:1.
The leadership of this company has made it clear that the company is not going to bid unless you get a prior guarantee from the government that the company will face no further separation of its business units. The government has indicated that it is not going to give that guarantee. We now see that there is a possibility of two viable rival bids, Axia and the Terria consortium, plus TransACT in the ACT. If any of those bidders win the tender, that could cut the company out of the core broadband infrastructure. Why hasn't management addressed this risk with shareholders? Isn't this a far bigger risk to the company than separation?2.
Telstra management have repeatedly ignored the question of what you will do if and when you walk away from the NBN tender process. Where do your options for company growth if you walk away from this, given that there could be 2-3 other bidders?3.
If Telstra does not bid, or pulls out of the NBN tender process, do you think the government would simply give up? Aren't you running the risk that the government could forcibly separate the company in response to create the conditions they want?4.
Looking ahead, it appears that the CEO, chairman, chief operations officer, and other senior staff will all be leaving within two years. Meanwhile, the CEO's incentive package seems heavily geared towards the short term, with no incentive plan past June next year. Where is the company looking to fill the CEO spot, and who will be managing the search given that Mr. McGauchie will be stepping down within two years?5.
The NBN is one of the largest infrastructure projects in Australia's history, one that Telstra cannot afford to lose out on to another bidder. Why has the board failed to place performance hurdles on Mr Trujillo's remuneration scheme that directly take into account the outcomes of the NBN tender process?6.
The national broadband network will be the largest infrastructure project in Australia's history. Successful bids for infrastructure projects typically have their industrial relations house in order. This government has clearly signaled that it does not appreciate Telstra's combative approach towards its workforce. Why is Telstra going against the wishes of its employees and refusing to bargain with their democratically elected representatives, particularly when so much is on the line?7.
Telstra's call centre employees have reported major problems for Telstra clients due to the introduction of the SIEBEL computer system. Overwhelming numbers report that they fear the company is losing business as a result. What has been the impact upon Telstra's customer base of the problems associated with the introduction of the system as part of Telstra's IT transformation?
These "ACTU as shareholder" questions made the best contribution to the AGM and generated interesting debate, although Donald ruled out number 6 quite aggressively by arguing it went to industrial relations rather than shareholder matters.Edited audio highlights from Telstra AGM
Here is the edited audio of my contributions:1. Two hours and 8 minutes is too long for formal presentations2. Remuneration report - what did we learn from last year's defeat?3. Is long-serving chairman Donald McGauchie planning to serve another 3 year term?4. Shareholders boo the board after refusal to let board candidates speak5. Can't you even show us the proxies like normal companies?6. Vote against the chairman to protest against this board election shemozzle
We'll have some video by next week because Telstra treated it like they were broadcasting The Ashes and had six different cameras filming every angle of proceedings, on top of the usual crews in the control room up the back:Telstra caves and shareholders back remuneration report
Having used up the first 128 minutes of available time, Donald McGauchie decided to be brutally efficient with the seven agenda items the meeting was convened to transact, by first calling for questions on resolutions 1, 2, and 3 at the same time.
So, there is a 15 minute presentation on the remuneration report but then we don't even get to debate it as a specific resolution because it was thrown in with the approval of the accounts and the adoption of a new constitution. All this from a company that saw its remuneration report voted down last year and almost voted down by a majority of non-government shareholders in 2006.
Three hours into proceedings, I was finally able to ask the question
about what lessons Telstra had learnt from last year's remuneration report defeat and whether it was a good look to give all directors a flat 10% cash pay rise on July 1 at the same time they were in negotiation with their staff and refusing to engage with the unions, even though 70% of the Rudd Cabinet are former union officials.
McGauchie is an old right wing warrior from way back, best known for leading the National Farmers Federation into the waterfront dispute and resisting negotiations with the ACTU as a James Hardie director. It therefore comes as no surprise that he wants to by-pass the unions in Telstra's wage negotiations. However, McGauchie would have been pleased that the remuneration report was passed with 96% in favour this year and he made an interesting comment about the difference 12 months can make.
"Last year we treated the remuneration report as a compliance document, this year we treated it as a communications document."
Whilst the annual report claims Sol Trujillo was paid a whopping $13 million last year, Charles Macek explained that his 5.2 million options have lapsed even though Telstra has significantly out-performed the broader market in 2008. This is a good point. Most annual report valuations on equity issues in CEO packages are massively over-inflated. Boards are now pointing this out to shareholders, but they happily said nothing when the same valuations were massively under-cooked during the boom.
If you take out tax, poor old Sol probably only finished up with about $5 million cash in his back pocket for 2007-08, which isn't much of a return for the pretty spectacular job he has done turning Telstra around, even if he has abused his market power a few times along the way.Undemocratic McGaughie muzzles board candidates
My first contribution on the excessively long presentations was meant just to be a preamble to a question on executive pay, but Donald had already moved to the next microphone before I had a chance.
By the time we went around the six microphones again, Donald was promising to shut down questions with the old "just three more" trick, even though we'd only been going for 42 minutes.
That said, Donald and Sol did generally give good detailed answers to questions, such as this effort
on executive pay.
The same can't be said for the director elections which were a complete joke. Once again, all four resolutions were rolled into one debate when the standard practice is to go through them sequentially, unless you're Rupert Murdoch's News Corp.
And because Donald was up for election, he handed over the entire board election debate to former CSIRO chairman Dr John Stocker, who did a terrible job.
For starters, the four candidates - Donald McGauchie, DHL CEO John Mullen, out-going former NAB CEO John Stewart and former Cochlear CEO Catherine Livingstone - weren't even up on the stage for the AGM.Is John Mullen coming back to Australia?
There were quite a few interesting issues around these four, but none of them spoke to the meeting and Stocker refused to let them answer questions. I really wanted to hear from Mullen because both proxy adviser CGI Glass Lewis and the Australian Shareholders' Association recommended against him on the basis that he has his hands full running DHL from New York. Shareholders disagreed, as 98% of the proxies were in favour and I do find it very strange that CGI Glass Lewis can support ABC Learning chairman David Ryan at Lend Lease, but oppose a world class Australian executive joining the Telstra board.
Mullen certainly isn't shy about his abilities. He's the only person who, through his secretary, made contact directly with The Mayne Report to suggest he should be on this list
of the most successful Australian expat executives. I asked whether Mullen was intending to move back to Australia and become a professional non-executive director over the next three years, but Dr Stocker ruled the question out of order and insisted there be no debate.
This completely turned around the tone of the meeting, to the point where the board was roundly booed. Have a listen to how it unfolded:Is long-serving chairman Donald McGauchie planning to serve another 3 year term?Shareholders boo the board after refusal to let board candidates speakCan't you even show us the proxies like normal companies?Vote against the chairman to protest against this board election shemozzleDoes Telstra need a new chairman?
Having served 10 years, Donald McGauchie should have been good enough to address the issue directly as to whether it was suitable that he serve another three years as chairman. Rio Tinto directors are turfed after 6 years and Amcor has a 10 year tenure limit. Given the emerging warfare with the government over structural separation, there is an argument that Telstra needs to get with the program and find a chairman who can at least deal with Canberra.
ANZ has made the switch, with Liberal Party fundraiser Charles Goode to be replaced by Sir Rod Eddington, who is chairman of Rudd's business advisory group.
Similarly, ASX has made the switch from John Howard's great mate Maurice Newman to David Gonski, who is very well connected in Labor circles.
It's a sad feature of Australia that so many of our biggest companies are inwardly focused service players that rely on government regulation and largesse to get by.
For this reason, Telstra should be at least be considering succession planning, but instead McGauchie wouldn't even speak on the question of whether he intended to serve another three year term. The ACTU point about Telstra risking shareholder value with its threats to boycott the NBN tender are a very valid point and I doubt any other major Australian public company chairman would contemplate such a strategy against the government of the day.
I urged shareholders to vote against McGauchie for the way the meeting was conducted and did so with the 14 proxies who'd handed over 93,000 votes. It wasn't quite the impressive 4329 shareholders who'd given 30 million votes to the ASA, but it was nice to be speaking for more than a handful of shares for a change.
All resolutions passed with more than 95% in favour today, so all up it was a relatively trouble free Telstra AGM compared to recent years, but the board deserves a kicking in the press for the board election process.
They certainly got touched up a bit by The Age's
Ian McIlwraith in both the general pages and the business pages
. The Herald Sun's
Fleur Leydon also captured some of the action
from the meeting procedure.
That's all for now.
Have a good weekend and keep doin' ya best, Stephen Mayne* The Mayne Report is a multi-media governance website published by
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