commentary Sol Trujillo's payout disclosed in Telstra's remuneration report attracted a lot of attention as soon as it was released. But the real story in the report is about the over-the-top pay deals stitched up by Trujillo before he left.
The deals in favour of former chief operating officer Greg Winn and networks boss Michael Rocca ought to come back to bite the Telstra board of directors.
Telstra's institutional shareholders have shown themselves to be bolshie in the past, particularly in relation to remuneration. If they have maintained their rage, it could fall directly in the lap of the head of the Telstra remuneration committee, Charles Macek.
Macek is one of several Telstra directors who happen to come up for re-election this year in accordance with the regular rotation for election of non-executive directors.
Any anger about the pay deals for Winn and Rocca would probably rub off on other directors with their bodies on the line in November including John Stocker and John Zeglis. Peter Wilcox is probably glad that he is retiring this time around because of the unrelated issues associated with his membership of the James Hardie board.
The other directors facing a vote at the next AGM are CEO David Thodey and CFO John Stanhope. They were both appointed this year.
Details of the contentious payments agreed by the board and, no doubt recommended by Trujillo before he left, are contained in the remuneration report released last week. The payments to Winn and Rocca make Trujillo's $9 million remuneration look tame.
Winn, Telstra's former chief operations officer who is known as "The Plumber", was retained as a consultant from 1 February this year until 31 March.
The question for the board is why let Winn finish his employment on 31 January and then immediately re-employ him as a consultant?
He was paid $666,666 or about $10,000 a day for that two-month period. The remuneration report says the payments were made to ensure that he was available full-time and he was prohibited from providing any services to any telecommunications business in Australia or New Zealand.
The question for the board is why let Winn finish his employment on 31 January and then immediately re-employ him as a consultant? Winn's transformation bonus of $2.22 million is more defensible considering it was only 63 per cent of the maximum achievable.
However, the board may cop flak for rewarding someone for a project that ran over budget by $200 million, was shrunk significantly in the IT space and ran over time by several years.
The retention payments for Rocca are as much on the nose as the consulting payments to Winn. The remuneration report discloses a $1 million retention payment to Rocca for 2009. It is believed there is another $1 million payable in 2010.
Rocca, who was very close to Trujillo, has worked for Telstra for about 40 years. If he left, the network would continue to function. So does the Telstra board want shareholders to believe that a person who has been rusted on to the Telstra mother ship for four decades is about to pull up stumps and head for Optus?
The only conclusion that can be drawn from this deal is that the board is worried the company's network would suffer if a single individual left.
Now that is worth a question or two at the annual meeting.
This article by Business Spectator's Tony Boyd is reproduced on ZDNet.com.au courtesy of a reciprocal publishing agreement.
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