With the investor Day and AGM coming up soon, now is an...

With the investor Day and AGM coming up soon, now is an opportune time to consider how the board and senior management have performed over time.

I have reviewed the CEO and Chairman reports over the past 10 or so years to understand the vision they had at the time and how they have delivered on that vision.

So, over the past 10 years the strategy has remained pretty much the same - to "improve customer service, invest to maintain network advantage and build foundation for sustainable long term growth. Sound a bit familiar?

So how would we judge him they have delivered on their vision?

I suggest that one way would be to review the remuneration reports that outline actual performance against targets set tab the AGM's.

From what I understand, the remuneration incentives for senior staff are based on performance against guidance. If the low end of guidance is achieved, a threshold is met and some bonus is paid. If you hit mid range, you are considered to have met your target and you get 100% bonus, if you meet high end of guidance, you can get a 200% (based on fixed salary).

So the way i look at it, if you don't hit your target you have failed or scraped a pass mark, if you hit your target you have done a reasonable job and if you go over your targets, you have overachieved.

There are a range of performance measures - some financial and some non financial (customer and employee satisfaction, product simplification, digital engagement etc). In my view, all of the non-financial measures are meant to lead to improvements in the financial measures over the longer term (happy customers and employees, simple products, digital engagement, good networks etc lead to more customers and so higher revenue and higher EBITDA and better returns to shareholders).

So, over the long term, only the financial criteria matter when judging the board and management (no point having good networks, happy employees and customers etc if revenues and EBITDA keep declining over the long term).

So what is the scorecard over the past 10 years?

The table below shows the percentage targets achieved over the past 10 years. 0% means guidance has not been met. 100% means that the midrange of guidance was met. More than 100% means that upper end of guidance has been met. For perspective, I have also included some numbers for FY11 and FY20 and the guidance for FY21.

1	Criteria	FY11	FY12	FY13	FY14	FY15 Penn	FY16	FY17	FY18	FY19	FY20 guidance range: actual result : %	Targets FY21
2	Total Income	$25.0b: 43%	47%	91%	100%	100%	0%	0%	100%	166%	$25.827.3b $26.1b 80%	23.225.1
3	EBITDA	$10.2b: 62%	82%	77%	98%	82%	100%	38%	0%	73%	$7.58.0b $7.5b 0%	$6.57.0b (0.7 nbn headwind)
4	FCF	$5.5b: 67%	51%	44%	100%	78%	44%	100%	171%	0	$3.33.9b :$3.4b 88%	$2.83.3b

(Note that for FY21, even accounting for the NBN headwind, it seems that EBITDA is forecast to decline even if upper end is achieved)

So in the past 10 years, EBITDA target has been hit only once and FCF has been hit 3 times.

Given the stated strategy to invest to achieve growth, we see that Revenue is forecast to be about the same as it was in FY11 if high end of forecast for FY21 is met. EBITDA has declined from $10.2b to $3.3b if high end of FY21 EBITA forecast is met and FCF has gone from $5.5b to $3.3b if high end of forecast is met for FY21.

So whilst employees are happy, the number of plans have been reduced, more customers interact digitally, and the core has been improved, there has been no revenue growth, EBITDA has fallen 30-40% and FCF has halved over the past 10 years.

All shareholders have an opportunity to submit questions to the Board and Senior management at the upcoming investor day and AGM. if you believe that their performance has not been acceptable, then now is your opportunity to provide them with that feedback.

So, what question will you be asking?

Here are some of mine:

1. Has any Board member or senior executive pretended to be a Telstra customer with an issue and tried to speak to someone when the issue could not be resolved via messaging.
2. Digital engagement has increased but that is largely because customers have no other option. How is customer feedback regarding digital engagement and the lack of opportunity to speak to a person when the desperately need to is measured
3. Despite ever reducing targets for incentive payments to senior staff, targets are almost never met. Is the Board happy with such performance over an extended period of time.
4. Despite the strategy to pursue revenue growth opportunities having been stated every year since FY11, there has been none over the past 10 years. Is the Board happy with this result?
5. The ever declining EBITDA seems to be wholly supported by cost cutting with very little support form revenue growth.

These are just few of mine and I am sure I will add to them before the investor day and AGM. i would be interested to read what questions you would put to Mr Penn and Mr Mullen if they were having a one-on-one chat with you.

Its time to provide some feedback to the Board and Senior Management on how they have performed over the past 10 years - after all, they work for (and are accountable to) us shareholders!