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'These measures are not always easy': Telstra staff told not to expect new laptops in cost-cutting drive

As Telstra braces for a backlash from shareholders over millions of dollars worth of executive bonuses at next week’s annual general meeting, staff are facing a freeze on ordering new laptops in an effort to help chief executive Andy Penn cut costs.

An internal email obtained by Fairfax Media shows the pressure on Telstra to find $2.5 billion in cost savings as it seeks to soothe a disgruntled shareholder base following a difficult year for the company.

Group executive of human resources Alex Badenoch sent senior leaders an email two months after Telstra announced its 2022 strategy "T22", which includes axing 8000 staff, saying new or replacement laptops and salary sacrifice vehicles would not be processed and there would be a “freeze” on recruitment except for critical, front-line and customer-facing roles.

“Much of the focus of T22 to date has been on the organisation design and we need to equally address how we further reduce costs in the way we operate under a new operating model,” Ms Badenoch said in the email.

[These] types of cost measures are not always easy, however these changes demonstrate that cost efficiences are happening across Telstra ...

Email from Telstra's Alex Badenoch
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“We have externally communicated that we will be adjusting our internal workforce size but in order to achieve the total productivity targets we need to also make adjustments to the broader cost base.”

New orders on laptops and cars had been put on hold until a review in November in order to “manage excess stock and space” as the company adjusted to changes in staff numbers, and Ms Badenoch asked that travel be limited to trips that are "truly essential".

“I appreciate that these types of cost measures are not always easy, however these changes demonstrate that cost efficiencies are happening across Telstra and at all levels. This is a critical message for our people as we implement organisational changes in the coming months,” she said, describing the changes as “not intended to be a short term adjustment”.

However, shareholder advisory groups are not convinced the cost efficiencies are occurring at the uppermost level of the company, with three firms advising investors to vote down Telstra’s remuneration report at the annual general meeting next week.

A report from proxy research firm ISS said there was a “misalignment between executive pay outcomes and the company’s performance” with lower profitability and a deterioration in shareholder value for the second year in a row.

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“The CEO's fixed remuneration increased in [financial year 2018], which is higher than market median, and variable remuneration remained largely unchanged, indicating a deepening misalignment between pay and performance.

“It is of concern that there seems little variability in the bonus from last year, potentially also indicating misalignment of performance metrics,” the report said.

Mr Penn will be paid a fixed salary of $2.38 million in 2018, plus bonuses totalling $2.14 million. His total compensation of $4.518 million compares to pay of $5.66 million in 2017.

A Telstra spokesman said the company was taking a range of measures to deliver on its T22 strategy.

"Changes such as these are part of the stronger cost discipline we are implementing to manage our broader cost base and help us achieve our the total productivity targets," he said.

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