Questions are being raised over the decision- making process behind the annual pay package for Telecom chief executive Paul Reynolds.
Dr Reynolds is to receive more than $5 million this year, including his full performance bonus, despite a slump in Telecom profits of 44% to $400 million.
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.
Telecom, New Zealand's biggest listed company, says Dr Reynolds received his maximum bonus for an outstanding first full year, in which he negotiated the company's obligations with the Government.
But telecommunications analyst Paul Budde says Telecom was going through a massive transitional phase when Dr Reynolds was employed and was no longer able to be run as a monopoly.
Mr Budde told Morning Report on Wednesday that it was likely Dr Reynolds would have told Telecom he would be unable to deliver higher profits - at least for the first two years.
He said Dr Reynolds' salary and bonus cannot be directly linked to Telecom's performance, because that has to do with the Government changing the regulatory environment and not his position as chief executive.
Telecom defends remuneration
Telecom has defended the remuneration amount, saying it is fair recognition for the outstanding job he has done.
The company argues its pay has to be competitive to attract and retain top executives. It says bonuses for senior management are paid only when demanding performance targets are met.
Prime Minister John Key says the salary paid to the Telecom chief executive is a decision for the company's board and shareholders and the Government cannot intervene with salaries paid in the private sector.
Mr Key says Dr Reynolds' salary and plans by its network arm, Chorus, to change its structure are separate issues.
Culture of greed - EPMU
The Engineering, Printing and Manufacturing Union says the remuneration is outrageous and shows "a shameless culture of greed" and disputes Telecom's view that Dr Reynolds is being fairly rewarded.
The union says the head of Air New Zealand gets nowhere near $5 million and the airline is doing well in a tough market.
The union is fighting a plan by the network arm of Telecom to turn lines engineers employed by Chorus into contractors and says the Government needs to get involved over what it calls "chaos" in the industry.
EPMU secretary Andrew Little, who is president of the Labour Party, told Morning Report the Government is about to invest $1.5 billion in a 21st century broadband network - yet the workforce is in chaos.