Peter Costello’s attack on Sol Trujillo’s pay packet this morning might make for a good populist headline, but according to the ABC he fudged furiously when asked whether the Government would actually vote its shares against the CEO’s package.

He should think seriously about doing so. The telco quietly slipped out its Annual Report yesterday — all 341 pages of it. Twenty five pages of the document consisted of the Remuneration Report, where it was revealed Sol Trujillo, collected a whopping $8.7 million last year. That consisted of base salary of almost $3 million, short-term incentives of $2.58 million and ‘other’ payments of $1.7 million. It continues to amaze how top-level executives can perform so poorly, yet despite companies paying a fortune for remuneration ‘experts’, CEOs will still be rewarded in spades. In 2006, Telstra’s net profit fell by 26.2% to $3.18 billion. Despite this huge decrease, its CEO was paid a short-term incentive (bonus) payment of almost $2.6 million. Interestingly, Telstra’s annual report noted that its short-term incentive scheme is designed to “reward annual corporate performance and individual achievements”. One shudders to think how much Sol would have taken home had he managed to actually increase Telstra’s earnings or share price.

It is especially disappointing that Charles Macek, who according to Stephen Mayne, claims to “have written the book on corporate governance” is chairman of Telstra’s Remuneration Committee which has allowed these exorbitant payments. In Trujillo’s defence, many of Telstra’s problems, such as increasing competition in mobile phones (average revenue per mobile user was down despite increased usage) and the turn-away from fixed-lines are not at all his fault. However, Trujillo’s remuneration is so out of step with community expectations, serious questions need to be asked about how the Telstra board could possibly approve such a lucrative and ill-conceived employment arrangement. Fortune’s Rik Kirkland produced a fantastic article on executive salaries earlier this year. In it, Kirkland quoted “investment fund superstar”, Eddie Lambert, who eloquently noted that “nothing offends more than executives being paid for failure.” At this rate, Telstra shareholders should be very offended.