http://www.theaustralian.news.com.au/story/0,25197,22721046-643,00.html

TELSTRA's board has refused to heed the wishes of the company's owners,
promising to push ahead with generous new pay packages for chief Sol
Trujillo and 260 senior executives despite a massive protest vote at its
annual shareholder meeting in Sydney yesterday.

In an embarrassing defeat for the board, two-thirds of institutional and
retail stock holders voted the package down, but the non-binding nature of
the poll left the way clear for chairman Donald McGauchie to ignore the
vote.

The 66 per cent no vote is the biggest in the three-year history of such
votes in Australia, and this is the second year in a row that a majority of
non-federal-government shareholders have voted against Telstra's
remuneration package.

It follows large protest votes by shareholders against large and opaque pay
packages at Macquarie Bank and Suncorp recently.

Most shareholder opposition was due to the lack of transparency in the
package, which kept secret most of the targets that executives needed to
meet to obtain multimillion-dollar bonuses.

Shareholders and their advisory groups were particularly concerned over soft
short-term hurdles handed to Mr Trujillo, who may leave Telstra with just 30
days' notice.

"We do not accept that further disclosure of performance hurdles would serve
shareholders' interests," Mr McGauchie said. "We are confident shareholders
will be well served by the remuneration plan discussed today."

Mr McGauchie singled out proxy advisory services for criticism as well as
Telstra's largest single shareholder, the Future Fund, claiming that neither
the advisers nor shareholders understood the "complexities" of the
remuneration package.

"Unless you can be part of that the negotiations, it's an extraordinarily
difficult thing to pass a sensible comment about," Mr McGauchie said.

While the board did receive some institutional support for the package, "the
opposition of the Future Fund has decided the final outcome", Mr McGauchie
said.

Future Fund chairman David Murray said he was a "bit disappointed" that Mr
McGauchie had picked out the Future Fund in his comments.

"The vote against the report is quite significant in terms of the general
trend in the market when it comes to remuneration reports in Australia," Mr
Murray said.

"Even without our vote there was still a very significant number of votes
against it. Any way you look at it, it is a very significant no vote."

Mr Murray said the fund believed "the critical principle in remuneration is
that there is a clear alignment between long-term equity based executive
reward and returns to shareholders."

"We believe this principle is not sufficiently evident in the Telstra
arrangements," he said.

Earlier, Telstra's board had privately criticised proxy adviser
Institutional Shareholder Services for recommending against the pay
proposal.

Yesterday, Mr McGauchie made the attack public. He said proxy advisers had a
"tick the box" methodology that was not appropriate for Telstra.

ISS chief Dean Paatsch likened Mr Gauchie's excuses to "the dog ate my
homework".

"The notion that we somehow dictate how our clients vote is a convenient
untruth," Mr Paatsch told The Australian.

"Our clients are sophisticated institutions that are capable of deciding
what is in their interests. If shareholders didn't find any value in what we
do, we would be out of business tomorrow."

The no-voters included the Queensland Investment Corporation, one of the top
20 shareholders in Telstra.

"Queensland Investment Corporation fully supports chief executives being
appropriately rewarded for producing shareholder value," QIC chairman Trevor
Rowe said last night.

"However that reward needs to be aligned with the shareholders' interests."