Angry shareholders give Telecom board hard time

2.45pm - UPDATE

The board of Telecom, the country's largest listed company faced a grilling today from shareholders insisting the chief executive should not get a pay rise and a controversial businessman should not get a seat on the board.

For most of the annual meeting in Auckland the resolutions, involving the auditors' fees, the re-appointment of Roderick Deane as chairman and Paul Baines as a director, and an increase in directors' fees, were accepted with relative calm.

However, discussion on a pay increase for chief executive Theresa Gattung, and the appointment to the board of Lindsay Pyne, a former chief executive of the Bank of New Zealand in the early 1990s, produced an angry and vocal response from shareholders.

They told the board Ms Gattung should not get a pay increase after Telecom's share price and dividend had dropped, and it was a bad look for Telecom to have someone on the board who was associated with the BNZ after its near collapse in 1989.

The shareholders voted on all seven resolutions as they left the meeting and the results of the poll were due later today.

Mr Pyne became chief executive of the BNZ in 1989 to help with the restructure after the bank faced bankruptcy. He oversaw a recapitalisation of the bank in 1990 and its sale in 1992 to National Australia Bank.

Today, members of the New Zealand Shareholders Association and other shareholders told the board Mr Pyne should not be appointed.

Shareholders Association director Ross Dillon said he had received many messages recently about Mr Pyne's appointment and he had been "staggered at the degree of bitterness and resentment" most of the messages expressed.

"Given Mr Pyne's history, and given that bitterness, I just do not see it as a clever thing for Telecom to engraft that degree of opposition onto its board through Mr Pyne's appointment."

He said another issue was the skill set Mr Pyne would bring to the board of Telecom.

He said Mr Pyne was a banker as were four other Telecom directors. Only one board member had Telecom experience and history.

He said Mr Pyne's experience seemed to be in turning badly performing companies around.

"If the message to shareholders is that the Telecom board believes that particular (remedial) skill set is required for Telecom, it might raise a whole lot of issues that have not been addressed."

However, Mr Dillon also said he had received numerous messages from people who had dealt with Mr Pyne and said he had been a "delight" to deal with on a personal level.

Earlier in the meeting Dr Deane told shareholders Mr Pyne had the unanimous support of the board, and his understanding of the issues associated with running large and complex businesses would be of "tremendous value" to the board.

However, Dr Deane would not respond to a 1993 Securities Commission conclusion raised by another speaker, Brook Asset Management chief investment manager Simon Botherway, that there was a material change in the BNZ accounting policy which resulted in an overstatement of the bank's earnings in 1990, and that Mr Pyne did not tell shareholders that the bank needed substantial recapitalisation.

Another speaker, Paul Dyer, said he had considerable sympathy for Mr Pyne who inherited an extraordinarily difficult situation at BNZ.

He went from a banking crisis in New Zealand to a banking crisis in Southeast Asia several years later that would have been unparalleled.

However, he said the crux of the matter was that he signed off accounts in the BNZ which were found by the Securities Commission to not represent the true state of the organisation.

Another speaker said Telecom could not afford the luxury of the controversial appointment of Mr Pyne as director.

"This is not good for image of Telecom. There I rest my case," he said.



On the issue of a pay rise for Ms Gattung, the meeting was told the board knew what was competitive and what else was being offered to other highly paid chief executives.

Dr Deane said in comparison to other telecommunications companies around the world, Telecom's performance was in the upper end of the spectrum.

The meeting was also told the board believed the proposed new salary package was appropriate "given the risks and responsibilities" of her role as chief executive of New Zealand's largest, and Australasia's 13th largest listed company.

However, shareholders told the board her salary should be pegged at the $1.77 million she received for the June, 2003 year.

Under a new scheme for top managers which was to be approved by shareholders at the annual meeting, Ms Gattung's salary would increase to $2 million in a package consisting of $1 million in cash, shares and options, some of which would be incentive payments linked to performance.

Her salary should stay at its existing level until the share price and dividends were restored to their former levels, a speaker said.

He said he was sure the shareholders would then be more than happy to increase her salary.

"Meanwhile I think the CEO might be able to survive on the current remuneration of one and three quarter million a year," he said.

Another shareholder told the meeting all he had seen in recent years was the value of his shares and dividends drop.

- NZPA