Telstra CEO Andrew Penn retires after more than 7 years, CFO Vicki Brady promoted

Vicki Brady will replace Andy Penn in the top job at Telstra but some of the telco’s execs are privately complaining of a lack of transparency in the appointment process.

Telstra boss Andrew Penn is retiring after more than seven years at the helm of the telco, and will be replaced by chief financial officer Vicki Brady. Picture: Supplied

Senior executives at Telstra were only told late on Tuesday – the day of the Budget evening – that the company’s managing director Andrew Penn would resign and be succeeded by Vicki Brady.

Mr Penn on Wednesday said it was the right time for him to depart the telecommunications giant after seven years in the job. He will be replaced by Ms Brady, the chief financial officer, in September.

“It‘s my birthday today actually, and one of the things I said to (Telstra chairman) John (Mullen) months ago was that this would be a good time for me,” Mr Penn said. “I’m 60 this time next year and there are a lot of moving parts to it a process like this, it doesn’t all happen by accident.”

Mr Mullen – in a glimpse of the potential for disquiet within Telstra’s senior ranks about the appointment – said he’d “be very disappointed if there was any fallout from these changes”.

“Contemplating this decision, we started to canvass the market, and we extensively canvassed domestic candidates as well as international candidates around the world,” Mr Mullen told an investor call on Wednesday, adding he had personally met with a number of candidates. “Specifically about internal versus external, I think one would always rather go with an internal candidate, but never at the cost of quality or professionalism,” he said.

Some Telstra executives, however, were privately complaining on Wednesday that the selection process had not been transparent and that others had not had a chance to put themselves forward.

In a statement, the company told The Australian: “There was a comprehensive search conducted through an external search firm and external candidates were identified and interviewed.”

“(The CEO’s leadership team) were informed late yesterday as it was a confidential matter with disclosure requirements … the announcement has been incredibly well received internally and it has created confidence about continuity of strategy and approach,” the statement reads.

Ms Brady takes over at a time of renewed competition from rivals TPG and Optus, and at a critical juncture for Telstra as it embarks on its T25 ‘strategy for growth’, following years of heavy cost-cutting and job cuts as part of T22 which completes this year.

Telstra shares dipped slightly on the news, down 0.8 per cent to $3.90 per share. Its shares are down about 7 per cent in the year to date, but are up about 15 per cent over the past 12 months.

As chief executive, Ms Brady will take home $2.4m per annum in fixed remuneration, inclusive of super contributions – on par with Mr Penn’s fixed payout and a significant jump on the $1.2m she was paid, according to the telco’s 2021 annual report. She could earn almost $10m a year if she achieves stretch targets set by Mr Mullen.

Ms Brady began her career with KPMG and also served as a senior executive with Optus and its parent company SingTel before joining rival Telstra.

“One of the things Andy told me recently is the CEO role might look incredibly daunting, but once you step into it there is an incredible team and access to people and expertise,” she said in an interview.

“I‘m not sure you’re ever fully prepared for it but I’m just making sure I set myself up as well as I can and I’ll be drawing on Andy through this five month period to help me get in the best possible position.”

Mr Mullen, who will likely depart the company next year once his tenure expires, paid tribute to Mr Penn’s tenure amid challenging circumstances. The company has endured plunging profits and in 2019 slashed its dividend, angering shareholders.

“Andy has led Telstra during a period of significant change and will be known for his courage in setting a bold ambition through the T22 strategy to deliver a transformed experience for customers, shareholders and employees,” Mr Mullen said.

“There is no doubt the strategy has delivered beyond expectations and has laid the foundations for Telstra’s recently announced T25 strategy and a renewed focus on growth and innovation.”

Mr Penn told The Australian as recently as last month at the company’s most recent earnings call that he had no intention of moving on. But Telstra had a team with ample talent in the event he was “knocked over by the proverbial bus,” he said.

Telstra CEO Andrew Penn and CFO Vicky Brady at Telstra headquarters in Melbourne, Thursday, August 15, 2019. (AAP Image/David Crosling)

“I am incredibly proud to work with a very capable team. And your job as CEO, regardless of your own plans, is to make sure that there is always succession within the team,” he said.

Mr Penn on Wednesday said there was no specific moment he decided that it was time to move on, but that the leadership transition was ‘the right thing for the company’. “These decisions obviously in life are always difficult … It’s mixed emotions. I love this job. It’s an incredible privilege and I love the company,” he said.

Natalie Tan, an equities analyst at abrdn, said that while the announcement came as a surprise, its timing makes sense particularly given Mr Mullen’s likely looming departure from his role as Telstra chairman in 2023.

“The chairman has been on the board since 2008, and in corporate governance a director should not have a term longer than 10 to 12 years, and if it exceeds this they’re no longer considered to be independent, so it’s probably not appropriate for Mr Mullen to seek reappointment and I don’t think that would be his intention,” Ms Tan said. “And you don’t want the CEO and the chairman to depart at the same time.

“Vicki’s just a great choice to replace Andy Penn. She’s a highly respected CFO, she’s incredibly detail oriented and you’d be hard pressed to find a better CFO at the big end of town.

“It’s a great outcome for shareholders, because the internal appointment limits risks to the T25 targets, and it’s good to see that level of continuity in the business and with the strategy.”

Mr Penn on Wednesday said once he departs Telstra in September he may explore new board appointments or a new hands-on role inside the technology industry. “I don’t know, I want to make a contribution in a number of the areas that I’m passionate about: digital leadership, technology, innovation, cyber, the arts.

“I’ve really enjoyed my time supporting the government in the cyber security space as well and so that’s an area that interests me … I might hear from some people and get some advice from mentors the like, but I’m not making any decisions right now,” he said.