01 · Briefing · what happened

A pay rise despite the outage, and the machinery built to watch the bosses

Finance News 3 min 18 sources

Telstra's CEO got a $700,000 raise the year a national outage hit millions. This week, regulators, activists and proxy advisers all pushed on how the hired hands are watched.

$700,000

CEO raise at Telstra

to $6.8m, the year of a national outage

$1.3m

bonuses docked

for the outage - yet total pay still rose

$1bn

Telstra share buyback

cash returned to owners; earnings up 12%

~2%

active funds that beat the market

more than luck would predict, one study found

At a glance

Telstra's CEO got a $700,000 raise to $6.8 million despite a national outage that hit millions.
The board docked senior bonuses by $1.3 million for the failure, but total pay still rose.
The company returned cash anyway: a $1 billion buyback and a higher dividend, with earnings up 12%.
Switzerland proposed tougher bank-bonus rules to curb reckless bets, after the 2023 Credit Suisse collapse.
Activist Nelson Peltz is forming a group to take Wendy's private; the shares jumped about 15%.
Cheap index funds and fee-cutting wealth managers are squeezing what money-managers can charge.
Underneath, US inflation came in mild at 3.4%, and the Fed is expected to hold rates.

Forces in play

Pay-vs-performance gap High→

Telstra's boss got a raise the year a national outage hit millions

Pressure on the bosses Building↑

Swiss bonus rules, an activist bid and proxy advisers all pushed this week

The manager's skim Easing↓

index funds and fee cuts squeeze what money-managers can charge

Inflation pressure Steady→

July prices held at 3.4%, so the Fed is expected to hold

In play Vicki Brady — Telstra CEO; got a $700,000 raise despite the outage Nelson Peltz / Trian — activist forming a group to take Wendy's private Swiss regulator FINMA — would gain power to fine banks and curb risky bonuses Proxy advisers ISS, Glass Lewis — tell shareholders how to vote on deals and pay

Where this points

Watch the shareholder votes ahead - Wendy's board review, Max Stock's pay meeting, LivePerson's merger - for whether owners actually rein in the hired hands or wave them through.

Full briefing

A raise the year the network failed

Telstra’s chief executive, Vicki Brady, received a A$700,000 pay rise to A$6.8 million (about US$4.8 million). [1] That came even though the board docked her bonus after a national mobile outage that hit millions of Australians. [1] In total, the board cut senior executive bonuses by A$1.3 million over the failure, yet Brady’s overall package still climbed. [1]

The company itself did well by its owners. Australia’s largest telecom firm reported cash earnings up 12% and a statutory profit of A$2.24 billion, up 3.2%. [2][3] It raised its dividend and launched a fresh A$1 billion buyback of its own shares. [2] So the year splits three ways: shareholders got more cash, customers got a broken network, and the person in charge got paid more. [1][3]

Who watches the hired hand

The Telstra row is one instance of a wider push this week over how company bosses are watched. Switzerland opened a consultation on tougher bonus rules for its banks, following the 2023 collapse of Credit Suisse. [4] Under the draft, bonuses would have to reward long-term performance rather than quick risk-taking. [4] The regulator, FINMA, would gain new powers to fine banks and step in earlier when risks build. [4]

The activist route showed up too. Nelson Peltz’s Trian Fund Management is forming a group to take the fast-food chain Wendy’s private. [5] Trian already owns about 16% of Wendy’s; the shares jumped roughly 15% on the report. [5][6] An activist buys a big stake to push a management it thinks is underperforming. Taking a firm private also strips away the daily scrutiny of public markets. [5]

The ordinary machinery ground on beneath the headlines. In Israel, the discount retailer Max Stock called a special meeting to vote on its chief executive’s pay. [7] Proxy advisers ISS and Glass Lewis, the firms that tell shareholders how to vote, both backed a merger at LivePerson. [8] And Paramount discussed an oversight board to protect CNN’s independence as it buys the network’s parent for $81 billion. [11]

The skim, under pressure

The other half of the problem is what the middleman charges. Active fund managers keep losing ground: one landmark study found only about 2% beat their benchmark more than luck would predict, and cheap index funds have made it harder still. [9] Wealth managers, chasing a wave of newly rich tech workers, are now cutting their fees to compete. [10] When a manager can be replaced by a cheap machine, the fee they can charge falls.

The backdrop: mild inflation, a patient Fed

Underneath it all, US inflation stayed tame. Consumer prices rose 0.1% in July, holding the annual rate at 3.4%, close to what economists expected. [12] Core inflation stayed subdued, easing pressure on the Federal Reserve, America’s central bank. [13] JPMorgan expects the Fed to hold rates steady, calling the run of well-behaved data “Teflon inflation.” [14] Stocks rose, with the S&P 500 lifted by strong results from the AI firm CoreWeave. [15] Gold held near a two-month high of $4,400. [16] Oil fell after the International Energy Agency cut its 2026 demand forecast. [17] And US mortgage rates finally stopped rising, nudging some buyers back. [18]

02 · Lesson · why it matters

Why the people minding your money are never quite on your side

Whenever you hand your money to someone to run, their interest and yours quietly drift apart - and closing that gap always costs something.

How it works

You own the money but can't run it yourself
So you hire someone to act for you
Their interest is not yours - they want their pay, their empire, their safe bet
You can't watch every move, and they know more than you
So you pay either the skim, or the cost of watching
The gap narrows but never fully shuts

The twist

The gap between whose money it is and whose hands are on it never fully closes - you only choose whether to pay the skim or the cost of watching.

Where you've seen this

Home renovations

the builder knows more than you and bills by the hour

Politics

voters own the state but can't watch every official who spends it

Landlords

the letting agent collects rent whether or not the flat is kept well

Doctors

you can't judge the treatment, so you trust the one who earns from more of it

The catch

Watching costs money too - past a point, guarding against a wayward manager is dearer than the harm they'd do.

Full lesson

The raise that didn’t match the year

Telstra had a bad year and a good one at once. Its mobile network failed nationally, cutting off millions. Its profits rose 12%. And its chief executive got a A$700,000 raise, even after the board clawed back A$1.3 million in bonuses over the outage.

That looks like a contradiction. It isn’t. It is the shape of nearly every arrangement where one person owns the money and another runs it. Economists call it the principal-agent problem, and it is one of the quietest, most universal forces in the world.

Whose money, whose hands

The principal is whoever the money belongs to: the shareholders who own Telstra, the savers whose pensions hold its stock, the customers who pay its bills. The agent is whoever has their hands on it: the chief executive, the board, the managers.

They are not the same person, and their interests don’t line up. The owners want the network to work and the shares to rise. The chief executive wants a bigger salary, a bigger empire, and a job that survives a bad quarter. Most of the time these overlap enough. But they never overlap completely, and the gap is where the trouble lives.

Why you can’t just watch

The obvious answer is to watch them. If the agent misbehaves, catch it and dock the pay. Telstra’s board did exactly that: it cut A$1.3 million in bonuses. And the total pay still went up.

That is the hard part. The owner cannot see everything. Thousands of shareholders can’t sit in on every board meeting or judge whether a pay package is fair. The agent knows the business from the inside; the owner gets a summary once a year. That imbalance of knowledge is what lets a gap open and stay open. You are always deciding with less information than the person you are paying.

The tools, and their price

So we build machinery to close the gap, and this week showed the whole toolbox. Switzerland proposed rules forcing banks to tie bonuses to long-term results, so a banker can’t get rich on a bet that blows up after they’ve been paid. Nelson Peltz, an activist investor, is trying to buy the burger chain Wendy’s outright - one owner big enough to actually watch, replacing thousands too small to bother. Proxy advisers exist to tell scattered shareholders how to vote. Regulators, boards, auditors, independent directors: all of it is the cost of watching the hired hand.

None of it is free. A watchdog regulator is paid for by the public. An activist takes a cut. A proxy adviser charges a fee. Even a bonus clawback is a blunt tool that a rising base salary can quietly undo. You pay to watch, or you pay the skim of not watching. There is no third door.

The skim, and why it is shrinking

The purest version of the skim is the money manager. You hand them your savings; they charge a percentage every year to invest it. For decades that fee held up even though the results usually didn’t. One famous study found that only about 2% of active fund managers beat a simple benchmark more than luck would predict.

What is changing is competition. A cheap index fund does much the same job for almost nothing, and wealth managers are now cutting fees to keep clients. When the agent can be swapped for a machine, the fee they can charge falls. That is the healthiest way the gap ever narrows: not by watching harder, but by making the agent easier to replace.

The web this sits in

Once you see it, it is everywhere, and you are in it. You are the principal when you own a pension, rent through a letting agent, or vote for a government that spends your taxes. You are the agent when someone trusts you with a budget, a project, a client’s account. The same drift runs through all of it.

The humbling part is how little any single seat can see. The shareholder can’t judge the CEO. The voter can’t watch the official. The patient can’t second-guess the doctor. We are all handing things we can’t fully check to people whose interests aren’t quite ours. And mostly it works - held together not by perfect watching but by reputation, habit, and the knowledge that a badly served principal can walk away. The gap never fully closes. The most any of us can do is know it is there, and hold our trust a little more loosely for it.

03 · Lab · your turn

Watch the hired hand

You own the money but someone else runs it; rehearse how much to spend watching them versus accepting their cut.

04 · Hope · carry this

The gap between owners and the people who run their money never fully closes. But we keep inventing better ways to watch - and a manager who can be replaced must earn their keep.