Telstra 2005 Annual Report Download - page 49

www.telstra.com.au/abouttelstra/investor 47
Appointment of Mr Solomon Trujillo
The Board undertook an international search to identify candidates
for the role of CEO. We also received independent remuneration advice
in developing an internationally competitive remuneration package.
As a result of this search, Mr Solomon D Trujillo was appointed CEO and
executive director of Telstra effective 1 July 2005. The terms of his contract,
which was disclosed in an ASX announcement on 9 June 2005, are
summarised below.
Mr Trujillo receives:
• A fixed remuneration package including salary, superannuation in
accordance with legislation, salary sacrifice benefits and any applicable
fringe benefits tax incurred by us to the value of $3,000,000 per annum;
• a sign-on payment of $1,000,000 on commencement of his
employment with us and pre-payment of 50% ($1,500,000) of his
potential fiscal 2006 short-term incentive.
In addition, Mr Trujillo will have a substantial proportion of his potential
remuneration delivered through the STI and the LTI plan.
• Short-term incentive
The fiscal 2006 STI plan provides for rewards up to the value of 100% of his
fixed remuneration ($3,000,000) subject to the achievement of personal
targets set by the Board and incorporating significant company
performance. The value of the fiscal 2006 STI payment will be reduced by
$1,500,000, reflecting the pre-payment. The balance, if any, will be delivered
as 50% cash and the other 50% will be provided as rights to our shares
which will vest in equal amounts over the following 3 years.
• Long-term incentive
Mr Trujillo will be invited to participate in our LTI plan. The remuneration
value attributed to the LTI plan will be equivalent to 1331⁄3% of fixed
remuneration ($4,000,000) for achieving pre-determined maximum hurdles
as defined by the Board. Achievement of these targets will require
significant performance by the Company and a gateway target will need
to be met in order to qualify for any equity. Failure to meet the gateway
targets will result in no vesting of the performance rights. However,
achievement of the gateway targets for the CEO will qualify performance
rights to the value of 100% of fixed remuneration ($3,000,000) to vest.
A linear scale exists for performance between the gateway targets and the
pre-determined target hurdles. The weighting for achieving the maximum
and gateway hurdles vary from those that applied to the CEO in 2004/05
as described earlier in this report.
The above package provides for 30% to be paid as fixed remuneration.
The balance is ‘at risk’, with the exception of the 50% pre-payment
in the fiscal 2006 STI plan, and requires the achievement of significant
performance milestones in order for Mr Trujillo to receive the maximum
amount under the short-term and long-term incentive plans.
Termination arrangements
Mr Trujillo has been employed by us under a contract without a fixed
duration and either party may terminate his employment by agreement,
by providing 30 days written notice. If Mr Trujillo’s employment is
terminated by us for reasons other than misconduct, he will receive,
in addition to any payment in lieu of notice:
• a termination payment of:
(a) twenty four months fixed remuneration if the termination occurs
within the first twelve months of employment; or
(b) twelve months fixed remuneration if the termination occurs after
the first twelve months of employment a pro-rata payment in
respect of his participation in the STI plan for the year in which
termination occurs.
• a pro-rata payment in respect of his participation in the STI plan for
the year in which termination occurs;
• the rights to equity allocated through the LTI plan prior to termination
subject to it achieving the respective performance hurdles in
accordance with the terms of the plan; and
• reimbursement of any taxation penalties that may occur in the event
of an early return to the United States.