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Telstra shares: 3 things to consider before next week’s AGM

As Telstra’s Annual General Meeting (AGM) nears, we examine 3 key things investors should know before this key event.

Telstra shares: AGM in focus Source: Bloomberg

When is the AGM set to be held?

Telstra’s Annual General Meeting (AGM) is set to be held on Tuesday, October 15, at the Melbourne Convention Centre.

The meeting is set to commence at 9.30am.

Who’s seeking re-election?

A central aspect of any AGM involves the potential re-election of company Board members.

In 2018 Telstra faced little resistance on this front, with the following Directors: Roy H Chestnutt, Ms Margie Seale and Mr Niek Jan van Damme all receiving overwhelming support from shareholders.

At next week’s AGM both Craig Dunn and Nora Scheinkestel will be seeking re-election.

Eelco Blok, having been appointed to Telstra’s Board after last year’s AGM, will be seeking election.

Telstra (ASX: TLS) endorses all three candidates.

‘Two strikes’ and you’re outta here

AGM dates and Board member re-elections aside, maybe the most closely watched aspect of Telstra’s (ASX: TLS) upcoming AGM will be its 2019 renumeration report.

In 2018, a staggering 61.98% of shareholders voted against the adoption of Telstra’s renumeration report.

In the wake of this result, Telstra pointed out that, ‘for FY19, there is a particular focus on goals which clearly align the management team to the delivery of our ambitious and bold T22 strategy.’

Ambitious indeed! In 2019 the Telstra share price has ran ahead of the market, rising 24% since January.

More than that, the blue-chip telco remains a market-leader in the 5G space and with the protracted TPG-Vodafone merger currently being mulled over in federal court, Telstra also has good runway to further entrench its dominance in the Aussie market.

Talking points aside, as Telstra is well aware, with the vote against its 2018 renumeration report, it has received ‘one strike’ – as part of the worrisome sounding ‘two strike’ system.

As the AFR succinctly summarised:

‘Under the two-strikes rule, when more than 25 per cent of shareholders vote down two annual remuneration reports in a row, it triggers a vote on a board spill that could result in the company's entire board of directors facing re-election.’

Telstra has indeed, included a ‘conditional spill resolution’ as part of next week’s AGM (see item 6) – should this year’s renumeration report be rebuffed by investors.

Specifically, Telstra noted that:

‘This resolution will only be put to the AGM if at least 25% of the votes are cast against the 2019 Remuneration Report (item 5) resulting in a “second strike”.’

‘If this occurs and the conditional spill resolution passes, all nonexecutive Directors currently appointed to the Board, will be required to stand for re-election at a special meeting of shareholders, if they wish to continue to stand as Directors.’

Unsurprisingly, Telstra’s Board believes that such an action would be against the best interest of shareholders – who as pointed out above – have already reaped the rewards of Telstra’s market leading status, since January.

Telstra share price: final thoughts

The last few months have been slightly less fortuitous for shareholders however: with the Telstra share price falling from A$3.99 on August 8 to around the A$3.46 per share mark today.

That’s a decline of a little more than 13%.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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