Telecom share options abandoned

Telecom has abandoned share options to incentivise its top employees after the 27 per cent slump in its share price since May rendered most options worthless.

"The board has determined that it will not grant any options in the 2006/7 year," the annual report released yesterday states.

Instead, most senior managers with an equity incentive component in their remuneration will receive restricted shares. These will not depend on the share price rising, but will only be received after the employee stays for the agreed period.

Telecom's top executives previously got around half their salaries in cash and half in performance incentives, of which half came in the form of share options. In July, it was revealed by the Business Herald that $6 million worth of these had been rendered worthless because of the company's share slump in the wake of the Government decision in May to force Telecom to open its network to rivals.

Chief executive Theresa Gattung was holding options valued at $2.1 million when issued, but now worthless. She still holds 2.74 million options and 1.4 million shares, the report shows.

Ms Gattung, who has seen more than $3 billion wiped off the company's value this year, failed to get a pay rise last year and has to make do on a reduced $2.2 million, down from $2.8 million last year.

That figure doesn't fully reflect the slump in Telecom's share price. The $2.2 million included $660,000 of performance incentive payments, halved from the previous year.

The report shows Gattung had to relinquish 259,646 out-of-the-money share options.