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Telecom to offer CEO and senior managers performance incentives to boost profits

By Pattrick Smellie, Fri 8 Nov 2013
FYI, this story is more than a year old

Telecom Corp, New Zealand's largest telecommunications company, will offer one-off performance equity grants to chief executive Simon Moutter and other senior managers over the next three years to incentivise them to boost profits.

Telecom, which carved out its regulated network operator unit Chorus at the end of 2011, is seeking to bolster earnings by focusing on areas of growth such as digital, data and mobility, and away from its declining legacy fixed-line business.

Telecom didn't achieve its short-term financial objectives for the business in its 2013 financial year, so staff only received low short-term bonuses, the company said today.

"There is still a lot more hard work to come to bridge the gap between the declining parts of the business and the growth potential from new businesses we are investing in," chairman Mark Verbiest told shareholders at the company's annual meeting in Auckland.

"We have been reworking the company's remuneration approach to do more to incentivise the sort of performance that will be needed to deliver truly superior shareholder returns with a three-year timeframe," he said.

The company's board decided yesterday to offer equity grants to the senior managers subject to certain shareholder returns being met, Verbiest said.

The hurdles will work on a sliding scale from 40 percent vesting at a total shareholder return of 1.5 times the cost of equity, to 100 percent vesting at a total shareholder return of 2 times the cost of equity.

For full vesting to occur, Telecom shareholders would need to have received total shareholder returns over the three year period of greater than 20 percent, compounded annually.

"If these challenging performance hurdles are to be achieved, most particularly, shareholders will have benefited - big time," Verbiest said.

The current financial year will not be any easier than last year as the company faces intense competition and an evolving market, Verbiest said.

Still, the company is holding market share and the turnaround programme to enable higher performance within the business is gathering pace, he said.

Verbiest affirmed guidance the company expects an unchanged full-year dividend payment of 16 cents per share in the 2014 financial year.

Shares in Telecom advanced 0.2 percent to $2.29. The stock is rated a 'hold' according to the consensus of 10 analysts polled by Reuters.

By Tina Morrison - BusinessDesk

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