Australia's Telstra Chairman: Defends CEO Salary

SYDNEY -(Dow Jones)- Telstra Corp. chairman Donald McGauchie Wednesday defended chief executive Sol Trujillo's salary and bonuses following criticism by Treasurer Peter Costello and Prime Minister John Howard.

"I vigorously reject any suggestion that Telstra's achievements are not substantial or that the board had not explained the basis of incentives paid to Mr. Trujillo," McGauchie said in a statement.

He said Trujillo's contract has been public since June 2005, his remuneration has been disclosed on six occasions in the past 16 months, and the basis of his 2005/06 incentive payment has been publicly available since the group's annual result announcement on August 10.

"I am very surprised that anyone could argue the board has failed to make this information publicly available," McGauchie said.

The latest standoff between the government and Telstra, which comes just weeks before Canberra sells A$8 billion worth of Telstra shares, follows confirmation this week that Trujillo was paid A$2.6 million in annual bonuses, despite overseeing a slump in the share price and large profit fall.

Costello said the Telstra board had a legal obligation to explain what performance criteria Trujillo had met to win the bonuses, which took his total remuneration for fiscal 2006 to A$8.7 million.

McGauchie said Trujillo's salary is equal to, or slightly lower than, the remuneration paid to the chief executives of like-sized companies.

"Mr Trujillo's incentive payment for 2005/06 recognized that he led a detailed review of the company's problems, developed a comprehensive multi-year plan for the most rapid and dramatic ever transformation of a telecommunications company worldwide, assembled the resources including executive talent to execute the plan, and achieved major milestones in the first year," the chairman said.

He added the Melbourne-based company has already made "significant progress" towards its five-year transformation, including a reduction in the rate of decline in traditional products, market share growth in key markets and significant savings in capital, procurement and operational expenditure.

-By Lyndal McFarland, Dow Jones Newswires; 61-2-8235-2957; lyndal.mcfarland@dowjones.com
-Edited by Ian Pemberton

(END) Dow Jones Newswires"

Posted to the site on 27th September 2006