25 Aug 2009

$5m pay for Telecom boss despite profit slump

9:01 pm on 25 August 2009

Telecom chief executive Paul Reynolds received more than $5 million for his year's work, despite a 44% fall in profits for New Zealand's largest listed company to $400 million.

The disclosure comes at a sensitive time for Telecom as its network business, Chorus, faces strike action by lines engineers unhappy at plans to turn them into owner-operators.

The Engineering, Printing and Manufacturing Union says Dr Reynolds' remuneration is an insult to workers and reveals a culture of greed at Telecom.

Telecom's share price has fallen about 38% since Dr Reynolds took up the reins in September 2007, as the company battles intense competition and spends billions on new networks to lure users.

As part of his remuneration package, Dr Reynolds received a base salary of $1.75 million, special payments for travel to Britain and a $3 million bonus which comprised 60% in cash and 40% in shares.

Radio New Zealand's business editor reports the bonus is the maximum amount Dr Reynolds can collect and clearly reflects the confidence of the board that he has Telecom on track to returning to earnings growth from 2011.

Dr Reynolds has also been issued Telecom shares worth $2.1 million, which will vest over the next three years as certain targets are achieved.

Culture of greed, says union

The Engineering, Printing and Manufacturing Union says Dr Reynolds' remuneration shows a shameless culture of greed.

EPMU national secretary Andrew Little says it is an insult to highly skilled lines engineers and technicians at Chorus who are fighting to retain their jobs.

Mr Little says lives are being turned upside down by the owner-operator plan and it is hard to see how the workers' goodwill towards Telecom can continue.

"To see a recently arrived chief executive being rewarded in this sort of way when a company he's responsible for is behaving in the way they are towards these important frontline workers is just a sheer insult," Mr Little says.

He says it is time the Government intervened to stop Telecom's "corporate madness" from continuing.

Pay 'peanuts' compared with overseas

The Institute of Directors says chief executives in New Zealand are probably much lower paid than many of their foreign counterparts.

The institute's research and policy manager, Dr William Whittaker, says there is now an expectation that New Zealand has to be more global in its thinking - and that must relate back to remuneration.

"It obviously sits at the top of remuneration scales in New Zealand, but if you compare it with the salaries and bonuses that were handed out on Wall Street and to the banking sector, then it's peanuts actually."

Bruce Sheppard, of the Shareholders Association, says Dr Reynolds clearly articulated his vision at the time he took up the appointment - and has carried through.

Telecom declined to comment on Tuesday.