The chairman of the Shareholders Association has defended Telecom executives' high salaries, saying the company operates in a global market and must pay globally competitive salaries.

Former Telecom head Theresa Gattung yesterday attacked the company for paying its executives much bigger salaries than when she was in charge.

Despite a dramatic slide in its fortunes over the past three years, Telecom paid its top executive team a total of $20.3 million last year - well up on the $17.5 million it paid the previous year.

In its annual report, Telecom defended the increase, saying the extra money was needed to hire more executives, including "key local and international talent", to "help deliver transformational changes".

The report says six staff were paid more than $1 million last year. In 2007, there were three.

Shareholders Association chairman Bruce Sheppard today defended Telecom, referring to the employment of chief executive Paul Reynolds who has more than 20 years with British phone giant BT.

He said Gattung was an internal appointment and he applauded the company for that but said they needed a change after clashing with a Government that was keen on regulation.

"Telecom needed fresh, external blood, it just did. Paul is a person who has dealt with structural and operational separation before at BT and he is a person who has a committed customer focus," Sheppard said.

He said Reynolds should not receive a bonus after Telecom's performance, but his base salary needs to be seen in the global context.

"Remember $3 million is only a million quid [pounds]," Sheppard said.

In her book Bird on a Wire, which goes on sale next week, Gattung - who received a leaving payment of $3.9 million in June 2007 on top of a base salary of $1.25m - questions whether the current staff deserve such generous pay.

"Now that I'm long gone I, with the rest of the country, wonder about the propriety of a company making half the annual profits it did a few years ago but paying its executives considerably higher salaries."

Gattung's criticism comes after a string of embarrassing failures in Telecom's new XT network, which have contributed to a plunge in its market value.

A big chunk of its business, the directories arm now known as Yellow, was sold to private investors two years ago for $2.2 billion.

Telecom has since been knocked off its perch as New Zealand's biggest public company by Fletcher Building, and its share price is down more than 80 per cent on its peak 10 years ago.

But over the past two years, the number of employees being paid more than $100,000 a year has risen from a quarter of the staff (2044 people) to one-third (2865).

Some executives also appear to have had big salary increases.

In 2007, chief technology officer Mark Ratcliffe was paid almost $1.4 million. Last year, Ratcliffe - now head of the company's network services division - made $1.9 million.

Wholesale chief Matt Crockett's package went from just under $1 million in 2008 to $1.4 million last year.

Gattung told the Herald politicians deserved much of the blame for Telecom's latest woes.

She said she predicted in 2007 that the Labour Government's decision to give competitors access to Telecom's exchanges, and to split the company into three divisions, would result in a "train wreck".

In her book, Gattung also reveals that former Labour Party president Mike Williams approached her shortly before she left Telecom to stand for Labour.

She says she was "flabbergasted".

ADDITIONAL REPORTING EDWARD GAY