One of the key criticisms by the general public of large companies recently has been the large disparity of remuneration between CEOs and regular workers.
CEOs are paid to make a small number of key decisions for the business, so it is arguable that the decisions for the largest businesses are worth a lot of money – assuming the decisions are the right ones.
Most of the time, if management do at least reasonably well then shareholder usually approve the pay and bonuses.
However, if shareholders see a large destruction of wealth then they’re not going to be pleased. Of course, the CEO can’t control the share price but they are one of the most people to influence it.
According to the AFR, CGI Glass Lewis, ISS and Ownership Matters have all recommended voting against Telstra’s remuneration report.
I can understand why it would be galling for Telstra Corporation Ltd (ASX: TLS) shareholders to see dividend cuts and the share price falling by over a third during the past two years, yet the executives are getting bonuses.
It is arguable that the current Telstra troubles go back to before the current CEO’s time, due to paying out too much dividends, however Andy Penn is the one in the CEO seat to try to fix things.
Whilst comparing CEO pay to other CEOs sort of makes sense, it could also be described an echo chamber where all CEOs are perhaps overpaid. Indeed, If I were a Telstra shareholder I wouldn’t be happy with the deteriorating Telstra prospects and profitability.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended TPG Telecom Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.