Telecom board fees up - with a catch

By PAUL BRISLEN

Directors who join Telecom's board from now on will not be eligible for a retirement payment but will receive a 25 per cent pay rise to $131,250 a year.

Telecom's UK equivalent, BT, pays far less in directors' fees. While chairman Christopher Bland takes home $1.42 million a year plus a bonus, the newest board members are paid $114,000.

BT's market capitalisation is $45.66 billion. Telecom's is less than a quarter of that - $11 billion.

Telecom spokesman John Goulter says the company receives independent advice on remuneration and sets its directors' fees accordingly.

"We also benchmark ourselves against a number of other telcos around the world and we're consistently in the top four or five for performance."

Goulter says that over a three-year period Telecom was the top performer of that group.

"We're the 13th largest company in Australasia and our fees reflect that level."

Telecom's latest recruit on the board, Wayne Boyd, will receive $131,250 a year, but will be required to spend the extra 25 per cent on Telecom shares, according to Goulter.

"Shareholders associations worldwide have been asking for this kind of move, that directors should have some kind of stake in the company."

Goulter describes the move away from retirement fees as a "trend across the market".

"This brings Telecom in line with NZX expectations."

Directors will not be allowed to trade in their shares until they retire from the board. Shares will be purchased at open-market rates.

Shareholders Association chairman Bruce Sheppard is happy that Telecom has "joined the pack" on the issue of retirement payments to directors.

"With Contact Energy and now Telecom making the move we can claim it as an unqualified success."

Sheppard said he would have been happier if Telecom had done away with retirement payments, even for existing directors.

"Contact in effect paid out a bonus based on what the retirement payment would have been and we would have liked Telecom to do the same."

Longserving Telecom board member John King will retire from the board at the end of September, marking the end of 14 years with the company. King, who is also a consultant with law firm Russell McVeagh and chairman of the Takeovers Panel, will receive $310,000.

In October Telecom announced it would increase the cash pool for directors from $950,000 to $1.5 million to allow this change to take effect.

Goulter says the company may also increase the number of board members by one to eight, although there is no plan to do so at the moment. "We will be announcing a new board member to replace Lindsay Pyne."

Sheppard said the Telecom board was the most highly paid in New Zealand but he believed the 25 per cent increase "feels about right" given an eight-year stewardship. "Eight years is about what we'd want to see although good people shouldn't be forced out, of course. They should work till they die."

However, Sheppard is worried that there is a lack of correlation between Telecom board's payments and the company's performance.

Board changes

Appointed: Wayne Boyd, chairman of Freightways, Auckland International Airport and Ngai Tahu Holdings and a director of Tru-Test, Forsyth Barr.

Retiring: John King, longest-serving Telecom director, chairman of the Takeovers Panel and consultant to law firm Russell McVeagh.