Telstra chairman defends CEOs, saying kids earn 'millions on Fortnite'

Telstra chairman John Mullen has delivered a remarkable spray at critics of chief executive Andy Penn's $5 million-a-year pay packet, arguing kids playing popular video game Fortnite, social media influencers and professional athletes are paid similar sums of money.

The telecommunications company avoided a second strike and possible board spill at its annual general meeting on Tuesday as Mr Mullen issued a scathing rebuke to those arguing large bonuses for executives should be reined in, noting sports stars and online "influencers" can also earn millions.

Telstra chairman John Mullen says business seems to bring out the detractors.Credit: Nick Moir

"I struggle that the business community is singled out," Mr Mullen said. "Young kids can earn $5 million now by playing Fortnite. And even influencers - you can earn millions of dollars just by wearing a nice jacket and standing in front of a landmark.

"And yet when a business executive devotes a huge portion of their life ... when they get to the top of their profession, it is somehow morally wrong that they get rewarded for it in an international global market," he said.

A Melbourne teenager won $4.62 million in August playing video game Dota 2 in an eSports tournament, putting his earnings above sports stars such as tennis player Nick Kyrgios.

This comes after Telstra shareholders revolted in 2018 with 62 per cent voting against the company's remuneration report. That earned the telco its first strike after a 12-month period of sharp declines in the share price, lower dividends and declining profits. A strike is registered when more than 25 per cent of shareholders vote against a company's pay proposals. Under the "two strikes" rule, a second 'no' vote at the subsequent AGM can result in a spill of the entire company's board.

It is somehow morally wrong that they get rewarded for it in an international global market.

Telstra chairman John Mullen

This year more than 95 per cent of shareholders voted in favour of the bonuses at the telco's annual general meeting in Melbourne on Tuesday. The share price has improved since Mr Penn last year introduced a radical turnaround strategy called Telstra 2022 and the incentive structure has been changed significantly compared with a year ago in response to the criticisms.

Mr Penn was paid $5 million in 2019, of which $2.6 million was incentive-based, compared with $3.8 million in 2018.

"If you devote your life to succeeding in many other disciplines, like sports, when you get to the top no one seems to begrudge you the earnings that go with that," Mr Mullen said.

"For some reason business seems to bring out the detractors," he said, though he admitted some businesses didn't help themselves with "really excessive pay packages".

"Today there is a real risk that the media scrutiny, populist criticism and governance challenges are starting to lead talented executives to look for alternative career paths such as private equity where they can build their careers out of the spotlight."

In 2015, Mr Penn's predecessor David Thodey said his salary was indefensible as he pocketed $12.84 million in his final year in charge.

The comments came as new research from the University of Technology Sydney's Rebecca Bachmann, Anna Loyeung and Helen Spiropoulos has urged investors to scrutinise non-disclosed or vague targets linked to executive cash bonuses. Bonuses can be up to five times the amount of the chief executive's base salary, the research found.

"We argue that cash bonuses can be a means to camouflage high levels of executive pay," Ms Bachmann said in a statement. More than 40 per cent of the ASX firms analysed by the researchers did not disclose details about non-financial targets.

Shareholder fury

Retail shareholders at the meeting voiced concerns about Telstra's performance to The Age and The Sydney Morning Herald.

Virginia from Windsor, a Telstra shareholder who did not wish to share her full name, voted against the remuneration report on Tuesday.

"I wanted a strike. The share price has fallen, dividends are down and I think the directors should be sharing the pain," she told The Sydney Morning Herald and The Age at the AGM.

"I want to see new directors and also to send a message. They can't just keep expecting pay increases when the business is doing badly."

I want to see new directors and also to send a message. They can't just keep expecting pay increases when the business is doing badly.

Telstra shareholder

Shareholders did lodge a substantial protest vote against the re-election of former AMP chief executive Craig Dunn to Telstra's board with 29.6 per cent of the votes cast against him resuming his position.

Major proxy CGI Glass Lewis had recommended its clients vote against Mr Dunn's reappointment arguing he "bears normative responsibility" for the financial services group's conduct that was uncovered during the Hayne royal commission.

Mr Mullen defended the former banking executive who joined the Telstra board in 2016 and is chairman of the audit and risk committee, saying he had at no time been personally accused of any wrongdoing.

In his re-election speech, Mr Dunn said he had learnt valuable lessons in the 25 years he worked in the financial services sector, including during the global financial crisis and "as with other directors, following the royal commission into financial services".

"The key lesson that stands out for me from both those experiences is the importance of good corporate governance and effective board oversight in providing sound decision making for the benefit of shareholders and customers alike," he said.

Tony, a shareholder from Victoria's Newport who also did not wish to share his full name, was surprised at the number of votes against Dunn.

"He worries me a bit because quite a lot of knowledgeable people got up and spoke against him," he said.