Thursday, September 6, 2007

Telecom NZ rewards ex Chief for Mediocrity

The smack in the face to investors that is the Teresa Gattung payout brings more questions than answers. Gattung was paid $5.4 million during her final year with the company, which has just been released in the 2007 Annual report.

Gattung ran Telecom New Zealand [TEL.NZ] for almost ten years and in that time was responsible for more destruction of wealth for New Zealand public shareholders in any one single listed company in this countries history.

When she took the helm in the late 90s the TEL share price had reached almost $10 and profit peaked at NZ$820 Million dollars in 1998 . Since then profit has struggled to grow and has remained basically flat until 2007 profit of just north of $900 million. Next year the company will struggle to make $650 million because of the sale of one of the companies core assets, the Yellow Pages, a decision arrived at while Gattung was at the helm.

When Gattung left the share price was barely over $4 and the company has been left with problems surrounding decaying infrastructure and obsolete technology like their 027 mobile network ,which was redundant technology even before it was introduced not so long ago.

I cant work out whether Gattung didn't get much criticism for her truly awful reign at the top of Telecom because she is a woman or because brokers and large institutions had so much money invested in the company that there wasn't that much critical opinion to be written about by our mainstream business media writers. It was probably a little of both.

Teresa Gattung was a short term thinker in business and wasn't able to grasp where the company would be in 10 years. Under-investing in the business, reactive rather than proactive, marketing spin and poor service were the hallmarks of her time at the top and the position she had the company in when she left has the company directionless, treading water and fearful of competition.

Clearly she left the company in a worse state than when she started and the $5.4 million she was paid out before she left, including over $2 million in "incentives," was a kick in the collective teeth of Telecom shareholders who had to suffer through what was one of the biggest losses in New Zealand corporate history last year.

The news that Ms Gattung has had "several job offers" from companies should leave those that have offered shaking in their boots were they to read the last 9 years of Telecom balance sheets.


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