Form 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of ___April___ 2007
(Commission File No. 000-24876)
TELUS Corporation
(Translation of registrant's name into English)
21st Floor, 3777 Kingsway
Burnaby, British Columbia V5H 3Z7
Canada
(Address of principal registered offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
X
Form 20-F _____ Form 40-F _____
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
X
Yes _____ No _____
This Form 6-K consists of the following:
______________________________________________________________________________
2007 annual general meeting
TELUS
March 9, 2007
TELUS Corporation
2007 annual general meeting
notice of annual general meeting i
invitation to shareholders 1
frequently asked questions on voting 2
business of the meeting 10
mandate and report of the Corporate Governance Committee 19
mandate and Report of the Pension Committee 23
mandate and Report of the Audit Committee 25
mandate and Report of the Human Resources and Compensation Committee
report on executive compensation
indebtedness of directors and officers
securities authorized for issuance under Equity Compensation Plans 59
directors' and officers' insurance and indemnification 73
additional matters and information 73
Board approval 73
appendix A: Statement of TELUS' corporate governance practices 74
appendix B: Terms of reference of the Board of Directors 81
All figures reported in this information circular are in Canadian currency.
Notice of annual general meeting
Notice is hereby given that the annual general meeting of TELUS Corporation
(the "Company" or "TELUS") will be held on Wednesday, May 2, 2007 at 11:00 a.m.
(EDT) at the Montreal Chateau Champlain, 1 Place du Canada, Montreal, Quebec,
for the following purposes:
1. receive the Company's 2006 audited consolidated financial statements
together with the report of the auditors on those statements;
2. elect directors of the Company for the ensuing year;
3. appoint Deloitte & Touche LLP as auditors for the ensuing year and
authorize the directors to fix their remuneration; and
4. transact other business as may properly come before the meeting or any
adjournment thereof.
Dated at Vancouver, British Columbia on the 9th day of March, 2007.
By order of the Board of Directors
Audrey T. Ho
Vice-President, Legal Services and
General Counsel and Corporate Secretary
Holders of common shares of the Company who are unable to attend this meeting
may vote by proxy. Simply sign and return a paper proxy or submit a telephone
or Internet proxy by following the instructions in the information circular
accompanying this notice or the instructions on the paper proxy.
To be valid, proxies must be received by TELUS' Corporate Secretary, c/o
Computershare Trust Company of Canada at 9th floor, 100 University Avenue,
Toronto, Ontario, M5J 2Y1, by 5:00 p.m. local time on April 30, 2007 or, if the
meeting is adjourned, by 5:00 p.m. local time, on the second-last business day
before the adjourned meeting date.
Invitation to shareholders
On behalf of the TELUS Board of Directors and the rest of the TELUS team, we
invite you to join us at TELUS' annual general meeting (the "meeting"). This
year, the meeting will be held:
Date: Wednesday, May 2, 2007
Time: 11:00 a.m. (EDT)
Place: Montreal Chateau Champlain
1 Place du Canada
Montreal, Quebec
At the meeting, holders of common shares of TELUS (the "shareholders") will be
asked to approve the business items in the notice of meeting and this
information circular. We will also update you on the Company's current
financial situation and on how TELUS is continuing to deliver on its strategy.
At the end of the meeting, a question and answer session will take place. At
the reception following the meeting, you will have an opportunity to meet your
directors and executive leadership team.
As a shareholder, your vote is very important to us and we encourage you to
participate either in person or by proxy. If you cannot attend the meeting in
person, we invite you to view our live webcast at telus.com/agm at 11 a.m.
(EDT) on May 2.
We look forward to seeing you.
Sincerely,
\s\ Brian A. Canfield \s\ Darren Entwistle
---------------------- ---------------------
Brian A. Canfield Darren Entwistle
Chair of the Board of Directors President and Chief Executive Officer
March 9, 2007
Information circular
Frequently asked questions
Q. Am I entitled to receive notice of the meeting and attend the meeting?
A. Yes, if you are a holder of common shares or non-voting shares of TELUS as
of March 13, 2007, which is the record date for the meeting.
Q. Am I entitled to vote and what am I voting on?
A. If you hold common shares as of the close of business on March 13, 2007, you
are entitled to cast one vote per common share on the election of directors
and the appointment of auditors. If you hold non-voting shares as of the
close of business on March 13, 2007 you have the right to attend and be
heard at the meeting.
Q. Am I a registered or non-registered shareholder?
A. You are a registered shareholder if you have a share certificate registered
in your name.
You are a non-registered shareholder if:
* your common shares are registered in the name of an intermediary (for
example, a bank, a trustee or an investment dealer) or the name of a clearing
agency of which the intermediary is a participant; or
* you hold your common shares through the TELUS Employee Share Purchase Plan.
Q. How can I vote my common shares?
A. You can vote either by attending and voting your common shares at the
meeting or, if you cannot attend the meeting, by having your common shares
voted by proxy. How you exercise your vote depends on whether you are a
registered or non-registered shareholder.
Voting by attending the meeting - registered and non-registered shareholders
If you are a registered shareholder, you are entitled to attend the meeting and
cast your vote in person.
If you are a non-registered shareholder, you are entitled to attend the meeting
and cast your vote in person, provided you have submitted a properly executed
proxy, inserting your name in the blank space provided and returning it in the
envelope provided. When you arrive at the meeting, advise the registration
staff that you are a proxy appointee. If you have received a voting instruction
form, please follow the instructions on the form.
Computershare Trust Company of Canada ("Computershare") is the trustee of all
common shares (the "employee shares") held on behalf of members of the TELUS
Employee Share Purchase Plan.
Holders of employee shares are treated in the same manner as non-registered
shareholders. If you hold employee shares, you are entitled to attend the
meeting and cast your vote in person, provided you have submitted a properly
executed proxy, inserting your name in the blank space provided and returning
it according to the instructions on the form. When you arrive at the meeting,
advise the registration staff that you are a proxy appointee.
Voting by proxy
How you vote depends on whether you are a registered shareholder, a
non-registered shareholder or a holder of employee shares.
Voting by proxy - registered shareholders
If you are a registered shareholder, you may vote your proxy in one of three
ways:
* by paper proxy to be returned by mail or delivery;
* by telephone; or
* by Internet.
Whichever method you choose, your proxy must be received by TELUS' Corporate
Secretary, c/o Computershare Trust Company of Canada (9th floor, 100 University
Avenue, Toronto, Ontario, M5J 2Y1), no later than 5:00 p.m. (local time) on
April 30, 2007 or, if the meeting is adjourned, by 5:00 p.m. (local time) on
the second-last business day before the adjourned meeting date.
* Proxy and voting by mail or delivery:
To vote by mail or delivery, your paper proxy must be completed, signed and
returned in accordance with the instructions on the paper proxy.
* Proxy and voting by telephone:
To vote by telephone, call the toll-free number shown on the proxy form that
was sent to you by mail or e-mail. Using a touch-tone telephone to select
your voting preferences, follow the instructions and refer to your holder
account number and proxy access number provided on your proxy.
Note that you cannot vote by telephone if you wish to appoint as a proxy
someone other than the person named on the proxy form. In that instance,
your proxy should be voted by mail, delivery or Internet.
* Proxy and voting by Internet:
To vote your proxy by Internet, visit the website address shown on the proxy
form that was delivered to you by mail or e-mail. Follow the online voting
instructions and refer to your holder account number and proxy access number
provided on your proxy.
Voting by proxy - non-registered shareholders
If you are a non-registered shareholder and you receive these materials through
an investment dealer or other intermediary, complete and return the materials
entitling you to vote, by following the instructions provided to you by the
investment dealer or other intermediary.
If you hold employee shares, use one of the three voting procedures outlined
above (mail, telephone or Internet), to direct Computershare, in its capacity
as trustee, as to how your employee shares are to be voted. Computershare, in
its capacity as trustee, will deliver the proxy forms for use at the meeting
for all votes to be cast at the meeting as indicated on all paper, telephone or
Internet proxies.
The voting rights attached to employee shares will be voted for or against or
withheld from voting only in accordance with the specifications made by the
employees. If a proxy is not received by Computershare in its capacity as
trustee according to the above procedures, the employee shares will not be
voted by the trustee.
For employee shares to be voted at the meeting by the trustee or a duly
appointed proxy, proxies must be received by TELUS' Corporate Secretary, c/o
Computershare, (9th floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1) no
later than 5:00 p.m. (local time) on April 30, 2007 or, if a meeting is
adjourned, by 5:00 p.m., (local time), on the second-last business day before
the adjourned meeting date.
If an employee holds common shares other than employee shares, another proxy
must be completed to vote those shares, unless the employee attends the meeting
and votes the common shares in person.
Q. Who votes my shares?
A. Each person named in the proxy to represent shareholders at the meeting is a
director and/or officer of the Company. You can appoint someone else to
represent you at the meeting, however, you must appoint that person by
either paper proxy or Internet proxy by inserting his or her name in the
appropriate space on the proxy form, or completing another acceptable paper
proxy. The person you appoint does not need to be a shareholder but must
attend the meeting in order for your vote to be cast.
Q. How will my shares be voted if I return a proxy?
A. By completing and returning a proxy, you are authorizing the person named
in the proxy to attend the meeting and vote your shares on each item of
business you are entitled to vote on, according to your instructions. If
there are no instructions with respect to your proxy, your common shares
will be voted in favour of:
1. electing as a director each person nominated by the Company for the
ensuing year; and
2. appointing Deloitte & Touche LLP as auditors for the ensuing year and
authorizing the directors to fix their remuneration.
Q. Can I revoke a proxy?
A. Yes, if you are a registered shareholder and have voted by paper,
telephone or Internet proxy, you may revoke it by delivering a duly
executed proxy by paper, telephone or Internet with a later date or a form
of revocation of proxy. Such paper proxies can be delivered to the
registered office of the Company, to the attention of TELUS' Corporate
Secretary, 21 - 3777 Kingsway, Burnaby, B.C. V5H 3Z7, any time up to and
including April 30, 2007, or if the meeting is adjourned, on the business
day before the date of the adjourned meeting.
Alternatively, you may revoke your proxy and vote in person, by delivering a
form of revocation of proxy to the Chair of the meeting at the meeting or any
adjournment thereof before the vote in respect of which the proxy is to be used
is taken. You may also revoke your proxy in any other manner permitted by law.
If you are a non-registered shareholder, you may revoke your proxy or voting
instructions by contacting the individual who serves your account.
As a holder of employee shares, if you have provided your proxy (by paper,
telephone or Internet) you may revoke it by delivering another proxy (by paper,
telephone or Internet) with a later date or a form of revocation of proxy, no
later than 5:00 p.m. (local time) on April 30, 2007 or, if a meeting is
adjourned, by 5:00 p.m. (local time) on the second-last business day before the
reconvened meeting date.
Q. Who has discretionary authority to vote on amendments or variations to
any of the business items and on any other matter that may properly come
before the meeting?
A. Your voting instructions provided by paper, telephone or Internet proxy
give discretionary authority to the person you appoint to vote as he or she
sees fit on any amendment or variation to any of the matters identified in
the notice of the meeting and any other matters that may properly be
brought before the meeting, to the extent permitted by law. As of March 9,
2007, neither the directors nor senior officers of the Company are aware of
any variation, amendment or other matter to be presented for a vote at the
meeting.
Q. Is my vote by proxy confidential?
A. Yes, your vote by proxy is confidential. Proxies are received, counted
and tabulated by our transfer agent, Computershare, in a way that preserves
the confidentiality of individual shareholders' votes, except:
* as necessary to meet the applicable legal requirements;
* in the event of a proxy contest; or
* in the event a shareholder has made a written comment on the proxy.
Q. Who is soliciting my proxy?
A. Your proxy is being solicited on behalf of TELUS management. The
solicitation of proxies will be made either by mail to your latest address
shown on the register of shareholders or by electronic mail to the e-mail
address you provided. In addition to solicitation by mail, employees or
agents may solicit proxies by telephone or other ways at a nominal cost to
the Company. The Company may, if determined advisable, retain an agency to
solicit proxies for the Company in Canada and in the United States. The
cost of solicitation is paid for by the Company.
Q. What are the quorum requirements for the meeting and how many common
shares are outstanding?
A. A quorum at the meeting will consist of at least two persons present who
are, or represent by proxy, holders of common shares holding in the
aggregate at least 20 per cent of the issued and outstanding shares
entitled to be voted at the meeting. On March 9, 2007, the Company had
177,671,014 common shares issued and outstanding.
Q. Does any shareholder beneficially own 10 per cent or more of the common
shares that are outstanding?
A. No. To the knowledge of the directors and senior officers of TELUS, on
March 9, 2007, no persons beneficially own, directly or indirectly, or
exercise control or direction over, common shares carrying more than 10 per
cent of the voting rights attached to all common shares entitled to be
voted at the meeting.
Q. What if I have a question?
A. If you have any questions regarding the meeting, please contact
Computershare:
* phone: 1-800-558-0046 (toll-free within North America)
1-514-982-7270 (outside North America)
* fax: (416) 263-9394
* e-mail: telus@computershare.com
* mail: Computershare Trust Company of Canada
9th floor, 100 University Avenue
Toronto, Ontario, M5J 2Y1
Restriction on ownership of shares
The Company and certain of its subsidiaries must comply with the Canadian
Telecommunications Common Carrier Ownership and Control Regulations (the
"Telecommunications Regulations"), the Telecommunications Act (Canada) (the
"Telecommunications Act"), the Broadcasting Act (Canada) (the "Broadcasting
Act") and the Radiocommunication Act (Canada) (the "Radiocommunication Act") in
order to provide its wireline, wireless and digital television services. These
statutes and their regulations restrict the ownership of voting shares by
non-Canadians. To maintain the eligibility of certain of its subsidiaries that
are Canadian common carriers under these statutes and their regulations, the
level of non-Canadian ownership of the Company's common shares cannot exceed 33
1/3 per cent and the Company must not otherwise be controlled by non-Canadians.
The Telecommunications Regulations give carrier-holding corporations of
Canadian common carriers certain powers to monitor and control the level of
non-Canadian ownership of voting shares. As a carrier-holding corporation, the
powers and constraints of the Telecommunications Regulations have been
incorporated into the Articles of the Company and were extended to also ensure
compliance under both the Radiocommunication Act and the Broadcasting Act. The
powers include the right to: refuse to register a transfer of voting shares to
a non-Canadian; require a non-Canadian to sell any voting shares; convert
voting shares to non-voting shares; and suspend the voting rights attached to
the voting shares. The Company monitors the level of non-Canadian ownership of
its common shares and provides periodical reports to the Canadian
Radio-television and Telecommunications Commission.
Non-voting shares
Subject to the prior rights of the holders of first preferred shares and second
preferred shares of the Company, holders of non-voting shares are entitled to
participate equally with the holders of common shares with respect to the
payment of dividends and the distribution of assets of the Company on the
liquidation, dissolution or winding up of the Company. The non-voting shares
cannot be subdivided, consolidated, reclassified or otherwise changed unless
the common shares are changed in the same manner.
Generally, the holders of non-voting shares are entitled to receive notice of,
attend and be heard at all general meetings of the Company and are entitled to
receive all notices of meeting, information circulars and other written
information from the Company that the holders of common shares are entitled to
receive from the Company, but are not entitled to vote at such general meetings
unless otherwise required by law. To ensure that the holders of non-voting
shares can participate in any offer made to holders of common shares (but that
is not made to the holders of non-voting shares on the same terms), the offer
must, by reason of applicable securities legislation or the requirements of the
stock exchanges on which the common shares are listed, be made to all or
substantially all the holders of common shares who are in any province of
Canada to which such requirements apply (an "exclusionary offer"). Each holder
of non-voting shares will, for the purposes of the exclusionary offer only, be
permitted to convert all or part of the non-voting shares held into an
equivalent number of common shares during the applicable conversion period. In
certain circumstances (namely, the delivery of certificates, at specified
times, by holders of 50 per cent or more of the issued and outstanding common
shares to the effect that they will not, among other things, tender to such
exclusionary offer or make an exclusionary offer), these conversion rights will
not come into effect.
If the Telecommunications Act, the Radiocommunication Act, and the Broadcasting
Act and the regulations thereunder relating to ownership and control are
changed so that there is no restriction on non-Canadians holding common shares,
holders of non-voting shares will have the right to convert all or part of
their non-voting shares into common shares on a one-for-one basis. The Company
will have the right to require holders of non-voting shares who do not make
such an election to convert their non-voting shares into an equivalent number
of common shares.
Business of the meeting
1. Report of management and consolidated financial report
The report of management and the audited consolidated financial statements for
the year ended December 31, 2006, including Management's discussion and
analysis, are contained in the TELUS 2006 annual report - financial review.
Shareholders who have requested a copy of the 2006 annual report will receive
it by mail. If you did not request a copy, you may view the annual report
online at telus.com/annualreport or obtain a copy upon request to TELUS'
Corporate Secretary at 21 - 3777 Kingsway, Burnaby, British Columbia, V5H 3Z7.
2. Election of directors
General
All of the directors were elected by the holders of common shares on May 3,
2006.
The Board has fixed the number of directors at 12. At the meeting, shareholders
are asked to vote for the 12 nominees proposed by the Company for election as
directors of the Company. Each holder of common shares will be entitled to cast
their votes for, or withhold their votes from, the election of each director.
Unless otherwise instructed, the persons named in the accompanying proxy as
proxyholders (the "management proxyholders") intend to vote for the election of
all 12 nominees whose names are set forth on pages 7 to 9. As described on page
9, the Company's majority voting policy applies to this election.
Management believes that all nominees are able to serve as directors. If, prior
to the meeting, any nominee is unable or unwilling to serve, the management
proxyholders, unless directed to withhold the common shares from voting for the
election of directors, reserve the right to vote for another nominee or
nominees in their discretion if additional nominations were made at the
meeting. Unless his or her office is vacated in accordance with applicable law
or the Articles of the Company, each director elected at the meeting will hold
office until the next annual meeting or until his or her successor is elected
or appointed.
The following table provides the name and background information of each
nominee, including present principal occupation, principal occupations and
directorships during the past five years and positions held with the Company.
______________________________________________________________________________
R.H. (Dick) Auchinleck R.H. (Dick) Auchinleck was employed by Gulf
Calgary, Alberta Canada, an oil and gas company, for 25
Age: 56 years, retiring in 2001 as President and
Director since(1): 2003 Chief Executive Officer of Gulf Canada
Resources after the sale of the company to
Independent Conoco Inc. He continues an association
with the company as a member of the
Member of: ConocoPhillips Board. From 1999 to 2001,
Human Resources and he was the President and Chief Executive
Compensation Committee Officer of Gulf. He is currently a member
Corporate Governance of the Board of Directors of Enbridge
Committee Commercial Trust and Red Mile
Entertainment, Inc. and the EPCOR Center for
the Performing Arts. In the past five years,
Dick has served on the Boards of Sonic
Mobility Inc. and Hydro One Inc. He received
a Bachelor of Applied Science in Chemical
Engineering from the University of British
Columbia.
______________________________________________________________________________
A. Charles Baillie A. Charles Baillie served as Chairman and
Toronto, Ontario Chief Executive Officer of The
Age: 67 Toronto-Dominion Bank from 1998 until his
Director since(1): 2003 retirement in 2003. In addition to his
affiliation with various educational and
Independent cultural organizations, Charles currently
serves on the Board of Directors of Dana
Member of: Corporation, Canadian National Railway
Audit Committee Company and George Weston Limited. In the
past five years, he has served on the Board
of Directors of Ballard Power Systems Inc.,
Quebecor World Inc., The Toronto-Dominion
Bank and TD Waterhouse Inc. Charles is
President of the Art Gallery of Ontario,
Chancellor of Queen's University and has
served as Chair of the Canadian Council of
Chief Executives. He holds an Honours B.A.
from Trinity College, University of
Toronto, an MBA from Harvard Business
School and an Honorary Doctorate of Law
from Queen's University. In 2006 Charles
was named an Officer of the Order of Canada
and he was recently inducted to The
Canadian Business Hall of Fame.
______________________________________________________________________________
Micheline Bouchard Micheline Bouchard served as President and
Montreal, Quebec Chief Executive Officer of ART Advanced
Age: 59 Research Technologies, a biomedical
Director since(1): 2004 company, from 2002 until July 2006. From
2001 to 2002, she was Corporate
Independent Vice-President and General Manager,
Enterprise Services Organization of
Member of: Motorola Inc. in Chicago. Micheline
Audit Committee currently serves as a director of Citadel
Group of Funds, a member of the IWF
Leadership Foundation and she is a past
president of the Canadian Academy of
Engineering. She has also served on the
Boards of Directors of Sears Canada Inc.,
Alliance Forest Products Inc. and Corby
Distilleries Ltd. She holds a Bachelor's
degree in Applied Sciences and a Master's
Degree in Applied Sciences from Ecole
Polytechnique, Montreal, Quebec. She also
holds Honorary Doctorates from Universite
de Montreal (HEC), the University of
Waterloo, the University of Ottawa, Ryerson
Polytechnic University and McMaster
University. Micheline is a member of the
Order of Canada.
______________________________________________________________________________
R. John Butler R. John Butler, Q.C. is counsel to Bryan &
Edmonton, Alberta Company, a law firm. John served on the
Age: 63 Board of ED TEL (Edmonton Telephones) prior
Director since(1): 1995 to its acquisition in 1995 by TELUS
Corporation and on the Board of TELUS
Independent Corporation prior to its 1999 merger with
BC TELECOM Inc. He is a member of the Board
Member of: of Directors of Trans Global Insurance
Corporate Governance Company and Trans Global Life Insurance
Committee Company, and a trustee of the Liquor Stores
Pension Committee Income Fund. In the past five years, John
has also served as Chair of the Edmonton
Eskimos Football Club and a member of the
Board of Governors of the Canadian Football
League. John holds a Bachelor of Arts and a
Bachelor of Law from the University of
Alberta.
______________________________________________________________________________
Brian A. Canfield Brian A. Canfield's career with TELUS spans
Point Roberts, Washington over 50 years, including four years as
Age: 68 Chair and Chief Executive Officer of BC
Director since (1): 1989 TELECOM Inc., three years as President and
Chief Executive Officer and one year as
Independent President and Chief Operating Officer. He
also served as President and Chief
Chair of the Board Executive Officer of TELUS Corporation on
Member of: an interim basis from September 1999 to
Pension Committee July 2000, after which he resumed his role
as Chair. He is a director of Suncor Energy
Inc., a member of the Canadian Public
Accountability Board and a member of the
Crawford Panel on a Single Canadian
Securities Regulator. In the past five
years, Brian has also served as a director
of Terasen Inc. and the Toronto Stock
Exchange. In 1997, Brian was named an
Honorary Doctor of Technology by the
British Columbia Institute of Technology.
In 1998 he was appointed to the Order of
British Columbia and in 2006 he was made a
member of the Order of Canada.
______________________________________________________________________________
Pierre Y. Ducros Pierre Ducros is President of P. Ducros &
Montreal, Quebec Associes Inc., an investment and
Age: 67 administration firm. Previously, he was
Director since(1): 2005 President and CEO of DMR Consulting Group,
Inc. (Canada), which he co-founded in 1973.
Independent Pierre has also held various management
positions at IBM Canada Limited and served
Member of: as an officer of the Royal Canadian Navy.
Audit Committee He is presently a member of the Boards of
Directors of Manulife Financial
Corporation, Cognos Incorporated, Emergis
Inc., RONA Inc. and the Canadian Instituted
for Advanced Research. In the past five
years, he served as a director of Nstein
Technologies Inc. and Engenuity
Technologies Inc. Pierre obtained a
Bachelor of Arts Degree from the Universite
de Paris at College Stanislas in Montreal
in 1956. He graduated from the Royal
Military College of Canada in 1960 and also
obtained a Bachelor of Engineering
(Communications) degree from McGill
University in 1961. Pierre is a member of
the Order of Canada and an officer of the
Order of Belgium.
______________________________________________________________________________
Darren Entwistle Darren Entwistle has been President and
Vancouver, British Columbia Chief Executive Officer of TELUS
Age: 44 Corporation since July 10, 2000. He began
Director since(1): 2000 his career at Bell Canada in 1988 and
joined Cable & Wireless plc (C&W) in 1993
Not independent in the UK, holding key positions in finance
and operations and becoming President,
Global Services, UK & Ireland prior to
joining TELUS. Darren is a member of the
Board of Directors of TD Bank Financial
Group and the Board of Governors of McGill
University. He is also the Chair of the
Royal Conservatory of Music's Capital
Campaign. Darren holds a Bachelor of
Economics (Honours) from Concordia
University in Montreal, an MBA from McGill
University and a Diploma in Network
Engineering from the University of Toronto.
______________________________________________________________________________
Ruston E.T. Goepel Ruston E.T. Goepel is Senior Vice President
Vancouver, British Columbia of Raymond James Financial Ltd., an
Age: 64 investment firm. Rusty serves as a director
Director since(1): 2004 of Spur Ventures Ltd., Auto Canada Income
Fund, Amerigo Resources Ltd., and Baytex
Independent Energy Trust. Rusty is the past Chairman of
the Business Council of BC and serves on
Member of: the Boards of two not-for-profit
Audit Committee organizations - the Vancouver 2010 Olympic
Organizing Committee and The Vancouver
Airport Authority. He is a past director of
Premium Brands Income Trust, Duke Seabridge
Ltd., Smith Tractor Inc. and Coast Tractor
Ltd. Rusty holds a Bachelor of Commerce
from the University of British Columbia and
is a recipient of the Queen's Jubilee Medal
for Business Leadership and Community
Services.
______________________________________________________________________________
John S. Lacey John S. Lacey was the Chairman of the Board
Thornhill, Ontario of Directors of Alderwoods Group, Inc., an
Age: 63 organization operating funeral homes and
Director Since(1): 2000 cemeteries within North America, until
November 2006. From January 1999 to January
Independent 2002, John was the Chairman of the Board of
Directors of Loewen Group. He is Chairman
Chair of: of the Advisory Board of Tricap, a director
Human Resources and of Cancer Care Ontario, the Canadian
Compensation Committee Imperial Bank of Commerce, and Stelco Inc.
and is currently the Chairman of Doncaster
Member of: Racing Inc. and Doncaster Consolidated Ltd.
Corporate Governance In the past five years, he also served on
Committee the Board of Directors of Alderwoods Group,
Inc., Canadian Tire Corporation, Limited,
Western Forest Products Ltd., the Liquor
Control Board of Ontario and Clarica, Inc.
John has completed the Program for
Management Development at Harvard Business
School.
______________________________________________________________________________
Brian F. MacNeill Brian F. MacNeill retired as Chief
Calgary, Alberta Executive Officer of Enbridge Inc., an
Age: 67 integrated pipeline company, on January 1,
Director since(1): 2001 2001. Prior to that he was Executive Vice
President and Chief Operating Officer of
Independent Enbridge Inc. and he has served on the
Board of Enbridge Inc. He is currently
Chair of: Chairman of Petro-Canada and a director of
TD Bank Financial Group and West Fraser
Audit Committee Timber Co. Ltd. Brian also serves as Chair
of the Board of Governors of the University
of Calgary. In the past five years, Brian
has served on the Board of Directors of
Dofasco Inc., Veritas DGC Inc., Legacy
Hotels REIT, Sears Canada Inc. and Western
Oil Sands Inc. Brian is a chartered
accountant and is a Fellow of the Chartered
Accountants of Alberta. He also holds a
Bachelor of Commerce from Montana State
University. Brian is a member of the Order
of Canada.
______________________________________________________________________________
Ronald P. Triffo Ronald P. Triffo is the Chairman and a
Edmonton, Alberta director of Stantec Inc., an engineering
Age: 67 and international professional services
Director since(1): 1995 company where he served in various
executive management positions for more
Independent than 25 years. He is the Chairman of the
Alberta Ingenuity Fund and the immediate
Chair of: past Chairman of ATB Financial. Ron is also
Corporate Governance a member of Alberta's Promise, the Advisory
Committee Council of the Faculty of Medicine and
Dentistry at the University of Alberta and
Member of: the Board of Governors of Junior
Pension Committee Achievement of Northern Alberta. He served
as a director and Board Chairman of ED TEL
(Edmonton Telephones) prior to its
acquisition in 1995 by TELUS Corporation.
He is also a past president of the
Consulting Engineers of Alberta and the
Association of Consulting Engineers of
Canada, and a past Chair of the Alberta
Economic Development Authority. Ron holds a
Bachelor of Science in engineering from the
University of Manitoba and an MSc
(Engineering) from the University of
Illinois.
______________________________________________________________________________
Donald Woodley Donald Woodley is the President of The
Mono Township, Ontario Fifth Line Enterprise, a privately held
Age: 61 company providing strategic advisory
Director since(1): 1998 services and executive coaching to the
Canadian IT industry. For ten months in
Independent 2006, he served as interim CEO and
President of Gennum Corporation. He still
Chair of: serves as a director of Gennum and is also
Pension Committee a director of DataMirror Corporation,
Canada Post Corporation and Steam Whistle
Member of: Brewing Inc. Don is a Past Chair of the
Human Resources and Board of Governors of ITAC (Information
Compensation Committee Technology Association of Canada), a Past
Chair of the Board of Governors of The
Stratford Festival of Canada, and a member
of the Board of Directors of the Hospital
for Sick Children Foundation. He holds a
Bachelor of Commerce from University of
Saskatchewan and an MBA from the Richard
Ivey School of Business at the University
of Western Ontario.
______________________________________________________________________________
(1) The Company or any of its predecessors.
Majority voting policy
In February 2007, the Board reviewed and adopted a majority
voting policy on the recommendation of the Corporate
Governance Committee. Under this new policy, a director who
is elected in an uncontested election with more votes
withheld than cast in favour of his or her election will be
required to tender his or her resignation to the Chair of
the Board. The resignation will be effective when accepted
by the Board. The Corporate Governance Committee will
consider the resignation and make its recommendation to the
Board on whether the resignation should be accepted. The
Board expects that resignations will be accepted unless
there are extenuating circumstances that warrant a contrary
decision. The Board will announce its decision (including
the reasons for not accepting any resignation) via press
release within 90 days of the meeting where the election was
held. The Board will not re-nominate for re-election any
director who fails to comply with this policy.
Board and committee meetings held for the year ended December 31, 2006
Board/Committee Total number of In-Camera
meetings Sessions
Board 8 Yes
Audit Committee [AC] 5 Yes
Corporate Governance Committee [CGC] 4 Yes
Human Resources and Compensation 5 Yes
Committee [HRCC]
Pension Committee [PC] 4 Yes
Board and committee meeting attendance by directors for the year ended
December 31, 2006
Attendance of directors
Board Committee
meetings meetings
attended attended
Director
Brian A. Canfield(1) (Board Chair) (PC) 8 of 8 4 of 4
R.H. (Dick) Auchinleck(HRC, CGC) 8 of 8 9 of 9
A. Charles Baillie (AC) 8 of 8 5 of 5
Micheline Bouchard(AC) 8 of 8 5 of 5
R. John Butler(CGC) (PC) 8 of 8 8 of 8
Pierre Y. Ducros(AC) 8 of 8 5 of 5
Darren Entwistle (2) 8 of 8 --
Ruston E.T. Goepel(AC) 8 of 8 5 of 5
John S. Lacey(HRC, Chair) (CGC) 7 of 8 9 of 9
Brian F. MacNeill(AC, Chair) 8 of 8 5 of 5
Ronald P. Triffo(CGC, Chair) (PC) 8 of 8 8 of 8
Donald Woodley (PC, Chair) (HRC) 8 of 8 9 of 9
(1) In addition to Pension Committee meetings, Brian A. Canfield regularly
attended meetings of other committees.
(2) Darren Entwistle does not serve on any committee of the Board, but
regularly attended committee meetings.
Director compensation
Each director of the Company who is not an employee of the Company receives an
annual retainer for acting as a director on the Board and each committee
served, and a fee for each Board and committee meeting attended. Darren
Entwistle, the only employee director, is not entitled, however, to receive any
compensation or benefits for serving as a director of TELUS.
Directors may elect to receive their annual retainers and meetings fees in any
combination of cash, deferred share units ("DSUs") and TELUS shares, except
that a director who has not met the equity ownership target must receive one
half of the annual board retainer in shares or DSUs until the target is
reached.
A fulsome review of directors' compensation was conducted in 2006. The
Corporate Governance Committee considered compensation principles, alignment
with shareholder value, executive compensation principles and the extent to
which they are relevant, and the magnitude of pay. The Corporate Governance
Committee engaged Hewitt Associates to assist in determining a comparator group
and gather comparators' information. The Corporate Governance Committee
selected a comparator group that focused on public companies in similar
industries as well as public companies of comparable complexity and size in
different industries.
The Corporate Governance Committee concluded that:
* the level of compensation must be sufficient to attract and retain
qualified directors with the experience and skills to lead the Company;
* equity is an important element of compensation to emphasize alignment
with shareholder value;
* the magnitude of equity pay should be fixed at a specified value rather
than a specified number of DSUs to better maintain alignment with market;
and
* compensation should be reviewed and set each year to ensure that it
remains current and aligned with market.
The Corporate Governance Committee determined that it is appropriate to target
cash compensation for a director (excluding meeting fees) at the 50th
percentile and total compensation (excluding meeting fees) at the 75th
percentile.
The Corporate Governance Committee then reviewed the principles against the
market data compiled by Hewitt Associates, and recommended that cash
compensation should be increased for the Board and the Audit Committee Chair
while equity grants should be determined based on a specified dollar value
rather than a specified number of equity to better reflect market value at the
time of grant. These principles were approved by the Board. Applying them, the
Board approved certain changes to directors' compensation for the 2007 year.
The schedule of retainer and meeting fees payable for 2006 and 2007 is set
forth in the following table. Meeting fees paid to directors (other than the
Chair and the Chief Executive Officer, or CEO, who do not receive such fees)
for board and committee meeting attendance in 2006 ranged from $24,000 to
$27,000 each.
------------------------------------------------------------------------------
Board service 2006 2007
------------------------------------------------------------------------------
Annual directors' retainer $25,000 $40,000
Meeting fee $1,500 $1,500
Annual equity grant 3,500 deferred $110,000 in deferred
share units share units
------------------------------------------------------------------------------
Committee service: Audit
------------------------------------------------------------------------------
Chair's retainer $10,000 $15,000
Member retainer $6,000 $6,000
Meeting fee $3,000 $3,000
------------------------------------------------------------------------------
Committee service: All other committees
------------------------------------------------------------------------------
Chair's retainer $6,000 $6,000
Member retainer $3,000 $3,000
Meeting fee $1,500 $1,500
------------------------------------------------------------------------------
Chair of the Board
------------------------------------------------------------------------------
Annual retainer $200,000 $225,000
Meeting fee - -
Annual equity grant 6,000 deferred share $150,000 in deferred
units share units
------------------------------------------------------------------------------
Director equity ownership and values as at year-end
Equity ownership targets
The Chair of the Board is required to hold at least $500,000 in TELUS equity,
and the other directors (other than employee directors) are required to hold at
least $300,000 in equity, in each instance within five years of appointment to
such position.
All of the proposed non-employee directors have exceeded their ownership
targets. See the table on page 12 for total equity ownership of each director.
Actual ownership at year-end
The following table shows the number of shares, DSUs and options held or
controlled by each non-management director and their total dollar value as at
December 31, 2006, based on the closing price of TELUS' common or non-voting
shares, as applicable, on the Toronto Stock Exchange (the "TSX") on December
29, 2006. Information for TELUS' sole employee director, Darren Entwistle, can
be found at page 31:
-------------------------------------------------------------------------------------------------------------
Directors Number of Number of Total value of Ownership Number of
common/non- DSUs shares and DSUs target met(1) options(2)
voting shares (common/non-
voting)
-------------------------------------------------------------------------------------------------------------
Dick Auchinleck 3,185/6,000 0/17,038 $1,369,128 Yes (4.5x) 0/0
-------------------------------------------------------------------------------------------------------------
Charles Baillie 0/65,200 0/15,148 $4,180,506 Yes (13x) 0/0
-------------------------------------------------------------------------------------------------------------
Micheline Bouchard 1,713/1,871 0/10,916 $756,987 Yes (2.5x) 0/0
-------------------------------------------------------------------------------------------------------------
R. John Butler 984/4263 0/14,693 $1,038,944 Yes (3x) 3,050/2,700
-------------------------------------------------------------------------------------------------------------
Brian Canfield 9,926/6,976 4,671/25,188 $1,935,348 Yes (4x) 74,000/5,400(3)
-------------------------------------------------------------------------------------------------------------
Pierre Ducros 329/642 0/7,138 $422,401 Yes (1.4x) 0/0
-------------------------------------------------------------------------------------------------------------
Ruston Goepel 0/16,500 0/10,841 $1,422,552 Yes (4.7x) 0/0
-------------------------------------------------------------------------------------------------------------
John Lacey 12,108/651 0/15,687 $1,498,086 Yes (4.7x) 0/2,700
------------------------------------------------------------------------------------------------------------
Brian MacNeill 1,000/5,269 0/29,386 $1,856,620 Yes (6.1x) 0/2,700
------------------------------------------------------------------------------------------------------------
Ronald Triffo 1,567/522 6,689/28,309 $1,941,992 Yes (6.4x) 4,100/2,700
-------------------------------------------------------------------------------------------------------------
Don Woodley 5,678/864 0/14,693 $1,113,317 Yes (3.7x) 3,050/2,700
-------------------------------------------------------------------------------------------------------------
(1) Excluding options.
(2) Options for common shares/options for non-voting shares. In 2003, TELUS stopped
granting options to directors.
(3) Mr. Canfield's options include options received for prior service as CEO.
Cease trade orders, bankruptcies, penalties or sanctions
Other than as disclosed, for the ten years ended December 31, 2006, TELUS is
not aware that any current director or officer of TELUS had been a director or
officer of another issuer which, while that person was acting in that capacity,
became bankrupt or made a proposal under any legislation relating to bankruptcy
or insolvency or was subject to or instituted any proceedings, arrangements or
compromises with creditors or had a receiver, receiver manager or trustee
appointed to hold its assets. In December 1998, John Lacey was asked by a group
of shareholders to lead the Loewen restructuring, as Chairman of the Board, a
position he held at the time of Loewen's filing under Chapter 11 of the U.S.
Bankruptcy Code and the Companies' Creditors Arrangement Act (Canada) ("CCAA").
In March 2006, Mr. Lacey was appointed to the board of directors of Stelco Inc.
("Stelco") as a nominee of Tricap Management Limited ("Tricap"). Stelco filed
for bankruptcy protection under the CCAA in January 2004. Mr. Lacey's
appointment as a director was part of a court supervised restructuring, from
which Stelco emerged on March 31, 2006 and pursuant to which Tricap had the
right to appoint four of Stelco's nine directors. Charles Baillie is a director
of Dana Corporation, which filed for bankruptcy in March 2006 under Chapter 11
of the U.S. Bankruptcy Code. The company has indicated that it expects to
emerge from bankruptcy in late 2007.
Other than as disclosed, for the ten years ended December 31, 2006, TELUS is
not aware that any current director or officer of TELUS had been a director or
officer of another issuer which, while that person was acting in that capacity,
was the subject of a cease trade or similar order or was subject to an event
that resulted, after the director or executive officer ceased to be a director
or executive officer, in the company being the subject of a cease trade or
similar order that denied the company relevant access to any exemption under
securities legislation for a period of more than 30 consecutive days. On June
14, 2006, and at the request of Cognos Incorporated ("Cognos"), the Ontario
Securities Commission ("OSC") issued a cease trade order against all directors
of Cognos, including Pierre Ducros, in connection with a delay in filing its
annual report with Canadian regulators. The delay was related to a review by
the United States Securities and Exchange Commission ("SEC") of the way Cognos
allocated revenue between post-contract customer support and licence fees. The
OSC lifted the cease trade order on August 3, 2006 after the SEC concluded that
it did not object to Cognos' revenue recognition policy.
3. Appointment of auditors
In 2002, upon the recommendation of the Audit Committee, the Board of Directors
appointed Deloitte & Touche LLP to fill the vacancy that resulted from the
Company's then current auditors, Arthur Andersen LLP, ceasing to practice
public accounting in Canada. Deloitte & Touche LLP were re-appointed auditors
of the Company on May 3, 2006 at the annual general meeting of the Company.
Upon the recommendation of the Audit Committee, holders of common shares will
be asked at the meeting to approve the appointment of Deloitte & Touche LLP as
auditors and authorize the directors to fix the remuneration of the auditors.
This re-appointment will become effective only if approved by at least a
majority of the votes cast by the holders of common shares present in person or
by proxy, entitled to vote at the meeting.
The management proxyholders intend to vote for the appointment of Deloitte &
Touche LLP as auditors of the Company, unless the holder of common shares
specifies that his or her proxy be withheld from voting.
Summary of billings and services by the external auditors
The two tables below set out the services provided by the Company's external
auditors. This extensive disclosure complies with the SEC rules on auditor
independence, and the services have been separated into four categories as
mandated by the SEC. This information is also contained in the Company's 2006
Annual Information Form.
The following table is a summary of billing by Deloitte & Touche, LLP, as
auditors of TELUS, during the period from January 1, 2006 to December 31, 2006:
Summary of billings for TELUS for the period January 1 to December 31, 2006
Type of work Deloitte & Touche %
-------------------------------------------------
Audit fees $3,757,244 94.11
Audit-related fees 162,000 4.06
Tax fees 72,763 1.83
All other fees -- --
-------------------------------------------------
Total $3,992,007 100.0
=================================================
The following table is a summary of billing by Deloitte & Touche, LLP, as
auditors of TELUS, during the period from January 1, 2005 to December 31, 2005:
Summary of billings for TELUS for the period January 1 to December 31, 2005
Type of work Deloitte & Touche %
-------------------------------------------------
Audit fees $2,237,606 90.7
Audit-related fees 195,584 7.9
Tax fees 33,180 1.4
All other fees -- --
-------------------------------------------------
Total $2,466,370 100.0
=================================================
Mandate and report of the Corporate Governance Committee
The mandate of the Corporate Governance Committee is to assist the Board in
fulfilling its oversight responsibilities to ensure that the Company has an
effective corporate governance regime. The Corporate Governance Committee is
responsible for monitoring corporate governance developments, emerging best
practices and the effectiveness of the Company's corporate governance
practices. The Corporate Governance Committee is also responsible for
identifying, recruiting and recommending nominees for election as directors,
and providing ongoing development for directors and overseeing Board and
director evaluations. The Corporate Governance Committee assesses and makes
recommendations to the Board for its determination of the "independence" and
"financial literacy", "financial expertise", "accounting or related financial
management expertise" of directors as defined under corporate governance rules
and guidelines.
Membership
The current members of the Corporate Governance Committee are Ron P. Triffo
(Chair), R. H. Auchinleck, R. John Butler and John S. Lacey. All members are
independent.
Meeting
The Corporate Governance Committee meets at least once each quarter and reports
on its activities to the Board. Activities reviewed are based on its mandate
and annual work plan. At each regularly scheduled quarterly meeting, it holds
an in-camera session without management present. The Corporate Governance
Committee met four times during 2006 and held four in-camera sessions.
Highlights
In 2006, the Committee undertook an extensive review of the following practices
that went beyond its annual activities.
Removal of mandatory retirement requirement on directors
The Board removed the requirement that directors retire at the age of 70. This
decision was based on an extensive review led by the Corporate Governance
Committee. The Corporate Governance Committee examined the purpose for the
requirement, the correlation between a director's age and effectiveness, and
the need for regular Board rejuvenation. It considered the profile and age of
the current directors and their years of service, the Board renewal that has
taken place organically, the robust annual evaluation of directors already in
place, the need to keep crucial talent on the Board beyond age 70, the
expectation of increased competition for qualified directors among large public
companies, and the fact that five out of the 12 directors would reach age 70
before the 2010 annual general meeting including relatively new directors who
would have served on the Board for well under ten years at that time.
Maintaining a mandatory retirement age of 70 would cause the Company to lose
qualified directors who would have served on the Board for a relatively short
tenure. The Corporate Governance Committee considered alternatives such as
raising the mandatory retirement age to 72 or another age, setting maximum
terms of service and creating an explicit discretion to waive the requirement
on an exception basis.
Ultimately, the Corporate Governance Committee concluded that, with a vigorous
evaluation process in place, mandatory retirement is not the optimal means of
ensuring Board renewal and age is not the optimal means of ensuring director
effectiveness, and that with the present tenure and profile of the Board,
maintaining a mandatory retirement age at 70 or another age is not in the best
interests of the Company. This assessment was supported by data on market
trends which indicate that more companies are waiving retirement age in order
to retain board talent, shifting towards a reliance on competence assessment
rather than age, and increasing the average age of directors to overcome
increasing difficulty in recruiting current CEOs from other businesses to serve
on boards.
Succession planning and committee composition
The Corporate Governance Committee focused on Board committee composition in
its 2006 review on succession planning. It considered and then recommended to
the Board a set of guidelines, some of which have been informally put into
practice in previous years. They include:
* rotating directors onto all Board committees so that over time, during
their tenure on the Board, they acquire a detailed understanding of all
areas of responsibilities through the committees and all have an
opportunity to chair a Board committee;
* enhancing Board renewal by setting general guidelines for minimum and
maximum term of service on Board committees and for Committee Chairs;
* establishing transition periods where necessary when committee chairs
step down; and
* ensuring rotation does not negatively impact stability and continuity of
operations of these committees.
The Corporate Governance Committee specifically reviewed the tenure of each
director on each committee as well as succession planning for the Audit
Committee financial expert.
The Board accepted the Corporate Governance Committee's recommendations and, as
an immediate step, appointed Don Woodley to chair the Pension Committee and
begin the transition that will enable John Butler to step down from that
committee following his lengthy service.
Enhanced commitment to corporate governance
During 2006, the Corporate Governance Committee undertook the following
initiatives as part of its commitment to best practices for corporate
governance:
* recommended to the Board for approval the adoption of a majority voting
policy;
* recommended to the Board for approval, together with the Human Resources
and Compensation Committee, pre-approval of compensation consultant
engagement for material non-Board work;
* recommended to the Board for approval changes to the Board Policy Manual
to reflect changes in practice or actual practice;
* prior to aborting the Company's proposal to convert into an income trust,
reviewed and discussed with management the principles to be adopted upon
conversion of the Company into an income trust, and supported management in
the development of a best-in-class governance structure. In that regard,
the Corporate Governance Committee received a briefing from management on
the views of governance stakeholders, model legislation as well as industry
research data;
* received and considered with management frequent updates on changing laws
and regulations, rules and corporate governance initiatives taken by
securities regulators and other stakeholders, emerging best practices and
their implications for the Company; and
* reviewed the implications of secondary market civil liability in Ontario
and other provinces where similar legislation was being adopted, including
the impact on the Company's policies and processes.
Initiatives relating to directors
The Corporate Governance Committee undertook the following additional
initiatives related to directors:
* reviewed and recommended to the Board for approval nominees for election
as directors;
* considered the resignations of several directors tendered automatically
upon a change in their employment, as required by the Board Policy Manual,
and recommended to the Board refusal of those resignations on the basis
that they do not negatively affect the directors' service;
* continued the ongoing education program for all directors;
* conducted an annual review of the succession planning process for the
Board Chair and the Committee Chairs;
* conducted an annual review of the eligibility criteria to act as a
director; and
* conducted an annual evaluation of the Board as a whole, and of each
director of the Company, the Chair of the Board and the Chairs of each
committee.
For more information on director compensation see the tables on page 11.
Signed, members of the Corporate Governance Committee
s/s Ron P. Triffo
__________________________________
Ron P. Triffo (Chair)
s/s R.H. (Dick) Auchinleck
__________________________________
R.H. (Dick) Auchinleck
s/s R. John Butler
__________________________________
R. John Butler
s/s John S. Lacey
__________________________________
John S. Lacey
Mandate and report of the Pension Committee
The mandate of the Pension Committee is to oversee the administration,
financial reporting and investment activities of the Pension Plan for
Management and Professional Employees of TELUS Corporation, the TELUS Defined
Contribution Pension Plan, the TELUS Edmonton Pension Plan, the TELUS
Corporation Pension Plan, the TELUS Quebec Defined Benefit Pension Plan
(formerly the TELUS Corporation Pension Plan for Employees of TELUS
Communications (Quebec) Inc), any successor plans and related supplemental
retirement arrangements as mandated by the Board, and the related trust funds
(the "Pension Plans"). The powers delegated to the Pension Committee in its
mandate are subject to those instances where powers and duties are specifically
assigned to third parties in the Pension Plan documents themselves. The Pension
Committee is responsible for reporting to the Board with respect to the
actuarial soundness of the Pension Plans, the administrative aspects of the
Pension Plans, investment policy, performance of the investment portfolios and
compliance with government legislation. The Pension Committee may, from time to
time, recommend to the Board changes to the Pension Plans and their
administration.
Membership
The current members of the Pension Committee are Donald Woodley (Chair from May
3, 2006), R. John Butler (Chair until May 3, 2006), Brian A. Canfield and Ron
P. Triffo. All members are independent.
Meeting
The Pension Committee meets at least once each quarter and reports its
activities to the Board. Activities reviewed are based on its mandate and
annual work plan. At each regularly scheduled quarterly meeting, the Pension
Committee meets in-camera, without management present. The Pension Committee
also meets with pension plan auditors without management present. The Pension
Committee met four times in 2006 and held four in-camera sessions.
Highlights
TELUS Defined Contribution Pension Plan review
The Pension Committee completed a comprehensive review of the defined
contribution pension plan offered to team members primarily in western Canada.
The review was conducted by management with the assistance of an external
consultant and resulted in streamlined investment fund choices, lower plan fees
for members, and a redesigned member and employer contribution structure. The
Pension Committee also elected to extend plan participation to all management
team members in central Canada effective January 1, 2007. All new management
team members hired after December 31, 2006 may only participate in the TELUS
Defined Contribution Pension Plan.
Plan management and governance
In accordance with its mandate, the Pension Committee approved the appointments
of auditors, actuaries, custodians, legal counsel and investment managers, as
needed. As well, the Pension Committee received, reviewed and approved where
mandated, the following:
* an annual report, including annual financial statements and audit reports
prepared by the external auditors for all pension plans that fall within
the Pension Committee's mandate;
* an audit scope report;
* regular briefings regarding legal matters that affect the pension plans;
* reports from each pension plan's actuaries, including the assumptions and
the results;
* plan budgets, including pension plan expenses and peer plan results;
* quarterly and annual investment results;
* plan insurance coverage;
* management self-assessment of internal controls;
* reports confirming compliance with pension plan ethical standards,
investment policies and procedures, derivative policies and legislation;
* surveys and reports concerning pension governance best practices;
* investment manager performance assessments;
* the strategic investment plan; and
* management presentations on the subjects of actuarial practices,
derivatives, pension risks, operations overview and performance
measurement.
Signed, the members of the Pension Committee
s/s Donald Woodley s/s R. John Butler
________________________________ ____________________________
Donald Woodley (Chair) R. John Butler
s/s Ron P. Triffo s/s Brian A. Canfield
________________________________ _____________________________
Ron P. Triffo Brian A. Canfield
Mandate and report of the Audit Committee
The Audit Committee supports the Board in fulfilling its oversight
responsibilities regarding the integrity of the Company's accounting and
financial reporting, the Company's internal controls and disclosure controls,
the Company's legal and regulatory compliance, the Company's ethics policy and
timeliness of filings with regulatory authorities, the independence and
performance of the Company's external and internal auditors, the management of
the Company's risks, creditworthiness, treasury plans and financial policy, and
the Company's whistleblower and complaint procedures. For more information on
TELUS' Audit Committee, including the text of the Audit Committee's terms of
reference, refer to the heading "Audit Committee" in TELUS' Annual Information
Form.
Membership
The Committee's current members are Brian F. MacNeill (Chair), A. Charles
Baillie, Micheline Bouchard, Pierre Y. Ducros and Ruston E.T. Goepel.
The Board has determined that each member of the Audit Committee is
independent, "financially literate" and that the Audit Committee Chair is an
"audit committee financial expert" and has "accounting or related financial
management expertise" as defined by applicable securities laws. Information
regarding the education and experience of the members of the Audit Committee is
contained in TELUS' 2006 Annual Information Form.
Meeting
The Audit Committee meets at least once each quarter and reports on its
activities to the Board. Activities reviewed are based on its mandate and
annual work plan. At each regularly scheduled quarterly meeting, it meets
separately, in-camera, with both the internal auditor and external auditors. It
also meets separately with management and without management present, at each
regularly scheduled meeting. The Audit Committee met five times during 2006 and
held four in-camera sessions.
Highlights
Financial reporting
* reviewed the impact of the proposed conversion of the Company into an
income trust;
* reviewed and discussed with the Company's President and CEO and the Chief
Financial Officer ("CFO") their readiness to certify the annual financial
statements and related disclosure material, as required under the U.S.
Sarbanes-Oxley Act ("SOX"), and the annual and interim financial statements
and related disclosure materials, as required under Canadian securities
legislation;
* reviewed and recommended to the Board for approval, the public release
and filing of the annual audited Consolidated financial statements and
quarterly unaudited Consolidated financial statements of the Company and
subsidiaries whose financial statements are publicly filed, including
related news releases and Management's discussion and analysis;
* reviewed and recommended to the Board for approval key securities filings
that contain financial information, including the Annual Information Form
and Form 40-F; and
* reviewed, throughout the year, any changes or adoption of significant
accounting policies and significant estimates impacting the current and
future financial statements of the Company.
External auditors
* oversaw the work of the external auditors;
* reviewed and approved the annual audit plan;
* monitored the progress of the external audit;
* received reports on the external auditor's internal quality control
procedures, independence and confidentiality procedures;
* met quarterly with the external auditors without management present;
* reviewed and set the compensation of the external auditors; and
* reviewed and pre-approved all audit, audit-related and non-audit services
provided by the external auditors or its affiliates.
Accounting and financial management
* reviewed the Company's major accounting policies, including alternatives
and potential key management estimates and judgments and the Company's
financial policies and compliance with such policies;
* reviewed with management the adoption of new accounting standards and
emerging best practices in response to changes in securities legislation;
* reviewed with management the Company's financial policies and compliance
with these policies;
* reviewed quarterly derivatives, and guarantees and indemnities reports;
* recommended adoption of amended annual and long-term policy targets
concerning matters such as leverage, liquidity, capital structure and
credit ratings;
* reviewed quarterly treasury updates and approved key treasury matters,
including financing plans such as the offering of 5.00% Notes maturing on
June 3, 2013 for aggregate gross proceeds of C$300 million;
* reviewed and recommended to the Board for approval the renewal of the
Company's share repurchase program through the facilities of the TSX;
* reviewed and recommended to the Board for approval in November 2006 an
increase to the Company's dividend within the target dividend payout ratio
guideline;
* received quarterly reports regarding taxation matters and
structural/legal reorganizations; and
* reviewed and discussed with management at each regularly scheduled
meeting the results of significant capital expenditures including specific
reviews of major capital projects (including several major systems and
technology deployments).
Internal controls and disclosure controls
* reviewed and approved the internal audit program to provide assurance
regarding risk exposures and internal controls;
* reviewed quarterly reports on internal audit activities, including a
management initiated internal audit in 2006 of TELUS' stock option and
long-term incentive compensation practices, which resulted in a "well
controlled" rating;
* reviewed internal audit's evaluation of the Company's disclosure controls
and internal control systems and risk mitigation progress;
* met regularly with the Chief Internal Auditor without management present;
* reviewed and approved the updated Internal Audit Charter which defines
the scope, responsibilities and mandate of TELUS' internal audit function;
* received the draft report of the Quality Assurance Review of the Internal
Audit function and approved recommended responses for the final report.
TELUS' internal audit function received a "generally compliant" rating
which is the top rating the Institute of Internal Auditors provides for
this type of review;
* monitored the adequacy of resourcing and the independence and objectivity
of the internal audit function;
* received briefings from management regarding key audit report follow-ups;
* reviewed, quarterly, the results of the cascading certifications by key
stakeholders in the financial reporting and disclosure controls processes
to provide reasonable assurance and confidence to the CEO and CFO;
* considered reports from the Chief Compliance Officer ("CCO") and General
Counsel on matters relating to compliance with laws and regulations;
* received updates from the CCO regarding the launch of a competition law
education program;
* received and considered quarterly reports regarding the receipt,
investigation and treatment of whistleblower, ethics and internal controls
complaints; and
* reviewed, quarterly, the expenses of the executive team and annually
reviewed the adequacy of, and compliance to, Company policies covering the
executive team's expense accounts and perquisites and their use of
corporate assets.
Enterprise risk management
* reviewed the results of management's annual risk assessment (and
quarterly updates thereto), the identification of key risks and the
engagement of executives to mitigate risk exposures;
* considered reports on the Company's business continuity, including work
stoppage, and disaster recovery plans;
* reviewed reports on management's approach for safeguarding corporate
assets and information systems;
* monitored the Company's environmental risk management activities and
results, and reviewed the Company's corporate social responsibility report;
* reviewed the adequacy of the Company's insurance coverage and monitored
the Company's property risk management program;
* reviewed reports on employee health and safety programs and results; and
* began receiving quarterly presentations by specific executive key risk
owners.
Audit Committee related governance:
* reviewed and recommended to the Board for approval the Company's records
retention policy;
* received and reviewed with management frequent updates throughout the
year regarding changing governance-related laws, rules and emerging best
practices and implications of the proposals of Canadian and U.S. regulators
with respect to the Audit Committee;
* reviewed and recommended for approval by the Board TELUS' 2007 Ethics
Policy;
* reviewed and recommended for approval by the Board updates to TELUS'
Disclosure Policy;
* monitored management's annual conflict of interest disclosure and review
process; and
* received and reviewed management's planning efforts to enable SOX 404
compliance for the 2006 financial year.
Signed, the members of the Audit Committee
s/s Brian F. MacNeill s/s A. Charles Baillie
_________________________________ ________________________________
Brian F. MacNeill (Chair) A. Charles Baillie
s/s Micheline Bouchard s/s Pierre Y. Ducros
__________________________________ ________________________________
Pierre Y. Ducros
Micheline Bouchard
s/s Ruston E.T. Goepel
__________________________________
Ruston E.T. Goepel
Mandate and report of the Human Resources and Compensation Committee
The Human Resources and Compensation Committee (the "Compensation Committee")
of the Board of Directors is responsible for developing the compensation
philosophy and guidelines on executive compensation, overseeing succession
planning for the executive leadership team, determining President and CEO
("CEO") goals and objectives relative to compensation and evaluating CEO
performance, reviewing and recommending CEO compensation based on its
evaluation, and determining compensation for executive management other than
the CEO. The Compensation Committee annually reviews and reports to the Board
on senior management organizational structure, and manages the Board-approved
equity-based incentive plans and supplemental retirement arrangements (other
than registered pension plans) for the executive leadership team.
Membership
The current members of the Compensation Committee are John S. Lacey (Chair),
R.H. (Dick) Auchinleck and Donald Woodley.
All members are independent and there are no interlocking relationships between
the members of the Compensation Committee and the executive leadership team.
Meetings
The Compensation Committee meets at least once each quarter and reports on its
activities to the Board. Activities reviewed are based on its mandate and
annual work plan. At each regularly scheduled quarterly meeting, the
Compensation Committee holds an in-camera session without management present.
It met five times in 2006 and held four in-camera sessions.
Compensation Committee Advisors
The Compensation Committee has retained the services of an external executive
compensation consultant, Hewitt Associates. The mandate of the consultant is to
serve the Company and work for the Compensation Committee in its review of
executive compensation, including the competitiveness of pay levels, executive
compensation design issues, market trends, and technical considerations. The
nature and scope of services rendered by Hewitt Associates to the Compensation
Committee is described below:
* competitive market pay analyses and market trends for executive
compensation;
* ongoing support with regard to the latest relevant regulatory, technical,
and accounting considerations impacting executive compensation and
executive benefit programs, including proxy disclosure;
* assistance with the redesign of any executive compensation or executive
benefit programs, including change of control provisions for long-term
incentive plans, cash settlement feature on stock options, and market data
and treatment of long-term incentives upon a proposed conversion to an
income trust; and
* preparation for and attendance at Compensation Committee meetings and
selected management meetings.
The Compensation Committee did not direct Hewitt Associates to perform the
above services in any particular manner or under any particular method. The
Compensation Committee has the final authority to hire and terminate the
consultant, and the Compensation Committee evaluates the consultant annually.
The Compensation Committee approves the annual work plan and all invoices for
executive compensation work performed by the compensation consultant. Hewitt
Associates may perform other services for the Company. Since 2005, Hewitt
Associates is required to notify the Compensation Committee of any material
engagement by TELUS management on non-Board related work. For 2006, this work
included flexible benefits and pension redesign, and consulting on certain
employee-related communications. The Hewitt Associates representative who
advises the Compensation Committee has no involvement in the provision of any
TELUS management-retained work. Commencing in 2007, Hewitt Associates is
required to obtain prior approval from the Compensation Committee Chair (or his
or her delegate) for any material non-Board work.
In addition, Hewitt Associates was engaged by the Corporate Governance
Committee in 2006 to assist in determining a comparator group and to gather
comparators' information on director compensation. This information was used by
the Corporate Governance Committee in its determination of the Company's
director compensation.
For 2006, the Company paid to Hewitt Associates for Compensation Committee and
Corporate Governance Committee work fees totaling approximately $308,000. The
Company also paid to Hewitt Associates approximately $315,000 for
management-retained work.
In 2006, the Compensation Committee engaged independent legal advisors to
review and provide their opinion on the appropriateness of change of control
provisions in the Company's option plans prior to recommending their adoption
to the Board.
Highlights
President and CEO
* reviewed and approved the corporate goals and objectives relevant to CEO
compensation;
* assessed performance of the CEO with the input of the Board and reported
the results to the Board;
* reviewed the form and adequacy of CEO total compensation;
* reviewed and recommended to the Board for approval the succession plan
for CEO;
* reviewed and recommended to the Board for approval the enhancement of
pension service credit to the CEO, on the basis of one year for each
additional year over the next five years, within the context of the CEO's
overall compensation and benefits offering;
* reviewed and recommended to the Board for approval the inclusion of
change of control provisions in the employment contract of the CEO, after
receiving input and information on market practices from the compensation
consultant; and
* reviewed and recommended to the Board for approval the CEO's compensation
based on the evaluation of his performance and the Compensation Committee's
review of the form and adequacy of CEO compensation.
Executive management
* reviewed and recommended for approval to the Board the proposed
appointment of individuals to executive management and as corporate
officers of the Company;
* reviewed the Company's compensation philosophy and guidelines for
executive management by assessing the linkage of executive compensation
philosophy and executive incentive plans to the Company's financial and
non-financial performance, support of the Company's business strategy, and
alignment with the Company's employee compensation philosophy;
* received an update from management on benefits alignment between the
wireline and wireless organizations;
* reviewed the CEO's evaluations of the performance of individual members
of executive management;
* reviewed and approved the selection of a comparator group for
benchmarking executive compensation;
* considered market trends and data, and then reviewed and approved the
form and adequacy of compensation for executive management other than the
CEO;
* reviewed and approved the compensation of individual members of executive
management other than the CEO, including certain base pay increases, after
considering the evaluation and recommendations of the CEO and applying the
Company's compensation principles as described below;
* reviewed and approved changes to the share ownership guidelines
applicable to executive management, and reviewed quarterly the ownership
level of each executive leadership team member;
* reviewed and approved the retirement and severance arrangements of one
retiring member of executive management;
* reviewed and approved the enhancement of pension service credit to one
member of the executive leadership team other than the CEO, on the basis of
one year for each additional year over the next five years;
* reviewed and approved the levels and types of benefits, including
perquisites and vehicles that may be granted to executive management; and
* reviewed and approved the succession plan for each member of executive
management, including specific development plans and career planning for
potential successors for both normal career progression and emergency
replacement situations.
Equity plans
* reviewed and recommended to the Board for approval the annual stock
option and restricted stock unit ("RSU") grants to management (including
executive management) for 2006 performance;
* received reports on the status of the option share reserves and monitored
and approved discretionary long-term incentive awards;
* reviewed and recommended to the Board for approval inclusion of change of
control provisions in the TELUS Corporation Management Share Option Plan
(the "Management Plan"), Restricted Share Unit Plan (the "RSU Plan") and
Executive Stock Unit Plan (the "ESU Plan"), after receiving the advice of
the compensation consultant and independent legal counsel;
* reviewed and recommended to the Board for approval a change to the option
exercise price under the Management Plan, from a weighted average trading
price of the underlying share on the day before the grant date to a
weighted average trading price over a five-day period, to match the formula
for determining the allocation price of RSUs under the RSU Plan. This
change was made to better reflect market value (a five-day average is
likely to be more reflective than a one-day average) and to promote
consistency in the grant price of different types of long-term incentives;
* reviewed and recommended to the Board for approval amendments to the
expiry date of vested options when the employment of an option holder is
terminated without cause, to better clarify the intention that such options
will expire 90 days after the last day worked;
* reviewed and recommended to the Board for approval amendments to the ESU
Plan to include as eligible participants certain senior management
positions to further increase their at-risk pay, and to delegate from the
Board to the Compensation Committee the authority to further expand the
class of eligible participants;
* reviewed and recommended to the Board for approval a feature in all
option plans to allow for cash settlement of exercised options rather than
the current issuance of treasury shares to be sold into the market for
cash. In its deliberations, the Compensation Committee considered the
implications of this proposal including positive impact on tax (to the
Company and option holders), accounting treatment, reduced share dilution,
option reserve depletion, likely market reception, regulatory approvals,
and net income volatility. The Compensation Committee also received input
from the compensation consultant and management on market practices and
precedents;
* reviewed and recommended to the Board for approval the creation of a
discretionary pool of options that may be granted at the CEO's discretion
to non-executive management for reward, retention and recognition purposes,
subject to the parameters specified by the Compensation Committee and
oversight by the Compensation Committee; and
* received external legal, compensation and tax advice pertaining to the
treatment of long-term incentives upon a proposed conversion of the Company
into an income trust, and considered management's proposal.
Governance
* received regular updates from management and the compensation consultant,
and considered proposed and new Canadian and U.S. regulatory requirements
and case law, as well as evolving best practices on executive compensation
matters;
* approved the annual work plan, budget and fees of the compensation
consultant and conducted an annual performance assessment of the
compensation consultant;
* required prior approval from the Chair of the Compensation Committee (or
his or her designee) on the engagement of the compensation consultant by
management to perform material non-Board work commencing in 2007;
* required disclosure of the annual fees paid to the compensation
consultant for both Board-related work and management work in the Company's
information circular;
* commenced a practice of receiving quarterly reports on compliance from
the Company's respectful workplace officer; and
* received an update on benefits alignment initiatives in the Company.
Public disclosure
* prepared and approved for publication the report on executive
compensation included below.
Report on executive compensation
An important mandate of the Compensation Committee is to design a compensation
arrangement for the Company's executive leadership team that supports its
business strategy to enhance the growth and profitability of the Company and
allow the Company to attract and retain the key talent necessary to achieve the
business objectives of the Company, as approved by the Board.
Compensation objectives and principles
The Compensation Committee is a strong proponent of pay-for-performance by
linking compensation directly to the achievement of business objectives. It has
approved a performance management philosophy that creates a clear and direct
linkage between compensation and the achievement of business objectives in the
short-term, medium-term and long-term by providing appropriate components of
fixed compensation, compensation at risk, and future income.
Executive leadership team members are evaluated on their achievement of
results, leadership skills, retention risk and value to achieving strategy
using the personal value-add assessment model ("PVAAM") as the assessment tool.
PVAAM ratings, in conjunction with competitive market compensation data and the
corporate balanced scorecard results, are then used to determine each executive
leadership team member's base pay, annual variable pay, restricted stock unit
allocations and share option grants.
In addition, executive leadership team members are assessed annually on their
potential for growth and development using a strategic staffing model. This
model is a comprehensive assessment tool and is relied on to design and update
succession plans for executive positions.
Benchmarking
The Compensation Committee has adopted a market-based approach to ensure that
the Company provides competitive compensation. The Compensation Committee
relates total compensation levels for the executives to the compensation paid
to executives of other Canadian telecommunications companies as well as
executives of companies in the general Canadian industry with revenue similar
to that of the Company, as approved by the Compensation Committee. The
comparator group is selected by the Compensation Committee upon receiving input
from management and the compensation consultant.
Total compensation (base salary, short-term incentive and longer-term
incentive) is generally targeted to be at or around the 75th percentile of the
selected comparator group, but only if performance warrants as described below.
The Compensation Committee also considers other elements of an executive's
total compensation including health and welfare benefits, retirement programs
and perquisites.
In establishing the appropriate compensation levels, the Compensation Committee
engages and receives expert advice from the compensation consultant who
conducts surveys and provides competitive data and market trends. The
Compensation Committee also considers recommendations from management, and its
decision may reflect other relevant factors and considerations.
Compensation mix
The key elements of the Company's executive compensation program are base
salary and at-risk compensation, which comprises annual variable pay,
medium-term incentives and long-term incentives. Additional compensation, such
as retention awards and signing bonuses, may be paid from time to time if the
Compensation Committee feels it is appropriate.
Base salary
In accordance with its market-based approach, the Compensation Committee has
targeted base salaries of the executive leadership team to be at approximately
the 50th percentile of the comparator group. Individual base salaries are
adjusted by the Compensation Committee to recognize varying levels of
responsibility, prior experience, breadth of knowledge, overall individual
performance and internal equity, as well as the pay practices of companies in
the comparator group.
At-risk incentive pay
At-risk incentive pay for the executive leadership team is made up of three
components, annual variable pay, medium-term incentives, and long-term
incentives. The target award for the annual and medium-term incentives is in
each case 50 per cent of an executive's base salary, while the target award for
the long-term incentives is the amount necessary to bring total compensation to
75th percentile based on performance.
Partially meeting objectives would result in a reduced award. Exceeding
objectives could result in an award of more than 100 per cent of base salary.
This approach ensures that at-risk incentive pay reflects actual performance
and requires truly outstanding results to deliver payments exceeding the target
award.
1. Annual variable pay
This component implements the Company's pay-for-performance philosophy by
providing executives with direct financial incentive in the form of an annual
cash award based on the achievement of results.
Corporate, business unit and individual performance objectives are set each
year. Annual variable pay is determined at the end of the year by rating the
extent to which the performance of the Company, each business unit, each
customer-facing (revenue generating) business unit, as well as individual
performance, meet or exceed these objectives.
The Company selects quantifiable goals that are easily measurable and
auditable, and tests the goals and targets against prior year actual
performance before adoption to check for year-over-year consistency. Targets to
determine when these goals have been met or exceeded are set out in the
corporate balanced scorecard and business unit balanced scorecards, and the
executives' personal performance objectives.
All corporate and business unit scorecard goals are tied to the six strategic
imperatives of TELUS:
* building national capabilities across data, Internet protocol (IP), voice
and wireless;
* providing integrated solutions that differentiate TELUS from its
competitors;
* partnering, acquiring and divesting to accelerate the implementation of
the Company's strategy and focus our resources on core business;
* focusing relentlessly on the growth markets of data, IP and wireless;
* going to market as one team, under a common brand, executing a single
strategy; and
* investing in internal capabilities to build a high-performance culture
and efficient operation.
The weighting given to corporate, business unit and personal objectives in
calculating variable pay for each named executive officer in 2006 is set out in
the following table:
Component weighting Target cash
award
_____________________________________________________________________________________________________________
Position Corporate Business Average Average Personal Percentage of
Unit BU customer- base salary
("BU") facing BU
_____________________________________________________________________________________________________________
President and CEO 30% -- 20% 30% 20% 50%
Darren Entwistle
_____________________________________________________________________________________________________________
EVP - CFO
Robert McFarlane 30% 20% -- 30% 20% 50%
_____________________________________________________________________________________________________________
EVP - Business Solutions
Joe Natale 50% 30% -- -- 20% 50%
_____________________________________________________________________________________________________________
EVP - Network Operations
Joe Grech 30% 20% -- 30% 20% 50%
_____________________________________________________________________________________________________________
EVP - Consumer Solutions
John Watson 50% 30% - - 20% 50%
_____________________________________________________________________________________________________________
Since the CEO is responsible for the performance of all business units in the
organization, his variable pay was specifically tied to the performance of all
business units. Given the nature of the Company's business, a portion of his
variable pay was also specifically tied to the performance of the
customer-facing business units who have direct line of sight to our customers.
For each executive vice-president, a portion of the award was specifically tied
to the performance of the business unit led by that executive rather than all
business units. For those executive vice-presidents who lead support functions,
such as Finance, Human Resources and Corporate Affairs, their variable pay was
based in part on the success of the Company's customer-facing business units to
ensure direct line of sight to the achievement of customer-facing business unit
objectives.
The personal performance component of each member of the executive leadership
team (other than the CEO) is assessed by the CEO, and the performance of the
CEO is assessed by the Compensation Committee with the input of the Board. Each
individual is assessed based on the extent to which he or she has achieved
results and exhibited leadership skills determined in accordance with
objectives set forth annually in his or her personal performance objectives.
The Compensation Committee then reviews and approves the at-risk pay to the
executive leadership team other than the CEO based on the recommendation of the
CEO, and the Board reviews and approves the at-risk pay to the CEO based on the
recommendation of the Compensation Committee.
2. Medium-term incentives
The ESU Plan is a medium-term incentive plan that was first implemented in 2002
for executive leadership team members and expanded in 2004 to include
designated senior management team members. The purpose of this plan is to link
a portion of the at-risk compensation to both the achievement of performance
targets and total shareholder return, and to promote the retention of
executives. Under the ESU Plan, participants are allocated restricted stock
units ("ESUs"). The amount and terms of any allocation to executive leadership
team members are approved by the Compensation Committee annually.
Generally, the number of ESUs allocated to an executive is based both on the
achievement by the executive of performance targets and the share price
performance of non-voting shares during the plan year. Achievement of
performance is determined in the same manner as achievement for the purpose of
determining annual variable pay. To link this award to shareholder return, the
actual number of ESUs awarded is determined by taking the dollar value of the
executive's annual cash variable pay award and dividing it by the value of
TELUS non-voting shares at the beginning or end of the performance year (being
the year preceding the year of allocation), whichever is higher.
Unless otherwise determined with respect to any particular allocation, ESU
awards to non-executive participants are determined in the same manner, except
that the target awards of these participants may differ.
This linkage, under the ESU Plan, to the share price of non-voting shares
further aligns the interests of the recipients with the interests of
shareholders. In this manner, any decline in the price of non-voting shares of
the Company over the performance year directly reduces the value of the
participant's incentive compensation, despite the fact that performance goals
for the grants have been met.
Each ESU is equal in value to the price of one non-voting share calculated in
the manner provided in the plan. When dividends on non-voting shares are paid
during the life of an ESU, a participant receives an equivalent credit that is
converted to additional ESUs in the participant's account. These dividend
equivalents do not vest unless the ESUs vest.
Retention is promoted through the vesting of ESUs. ESUs allocated under the ESU
Plan vest and become payable in equal annual instalments over approximately a
three-year period, with all ESUs being paid out before the end of the second
year after the year of allocation. If the participant resigns during this
period, all unvested ESUs are forfeited. The value of the ESUs at payout is
based on the value of non-voting shares at that time, calculated as required by
the ESU Plan. In this manner, the price of non-voting shares of the Company
directly impacts the value of the participant's incentive compensation at
payout. Payments under the ESU Plan may be in cash or non-voting shares
purchased in the market or, subject to all necessary corporate and regulatory
approvals, in non-voting shares issued from treasury.
In 2006, the ESU Plan was amended to incorporate accelerated vesting upon a
change of control. A full description of the change of control provisions, when
they may be triggered under the Management Plan, the reasons they were added,
and the Board's discretion relating to them, is set out on pages 39 and 40 of
this circular.
3. Long-term incentives
Long-term incentives are provided under the Management Plan and the RSU Plan.
The purpose of these plans is to align the interests of executives with those
of shareholders and to provide incentive compensation based on the value of
non-voting shares. This strategy provides an opportunity for executives to
acquire, through share options and restricted stock units ("RSUs"), an
increased ownership interest in the Company.
The amount and terms of any long-term incentive compensation determined by the
Compensation Committee will be consistent with the overall compensation
philosophy and objectives as set out above. As noted previously, long-term
incentive compensation is awarded based on two main factors: competitive market
compensation considerations and each executive leadership team member's PVAAM
ratings. The resulting assessment has a direct bearing on the long-term
incentive awards.
Share options are granted at an exercise price not less than the market value
of the non-voting shares. Market value is based on the arithmetic average of
the daily weighted average trading price on the Toronto Stock Exchange
(excluding certain block trades and trades after a certain time in the day) for
the five trading days before the grant date.
The Compensation Committee recommends to the Board the vesting schedule and the
term of the share options. If no recommendation is made, then the share options
will vest on the third anniversary of the grant and have a term of seven years.
The term of the share options may not exceed 10 years. Share options may not be
transferred or assigned by a participant.
Similar to the ESUs allocated under the ESU Plan, all RSUs allocated annually
under the RSU Plan must be paid out before the end of the second year after the
year of allocation. Each RSU is equal in value to the price of one non-voting
share calculated as provided in the RSU Plan. When dividends on non-voting
shares are paid during the life of an RSU, a participant receives an equivalent
credit which is converted to additional RSUs in the participant's account.
These dividend equivalents do not vest unless the RSUs vest. The value of the
RSUs at payout is based on the value of non-voting shares at that time,
calculated in the manner required by the RSU Plan. In this manner, the price of
non-voting shares of the Company directly impacts the value of the
participant's incentive compensation at payout. Payments under the RSU Plan may
be in cash or in non-voting shares purchased in the market, or, subject to all
necessary corporate and regulatory approvals, in non-voting shares issued from
treasury. The Compensation Committee has the right to determine the vesting of
each RSU allocation under the RSU Plan.
Amendments to long-term incentive plans
Change of control
In 2006, the Board adopted a set of change of control provisions in the
Company's medium and long-term incentive plans, being the Management Plan, the
ESU Plan and the RSU Plan. Outstanding options under all other equity plans
have vested so that change of control provisions are not necessary. These
amendments generally provide that upon a change of control of the Company, as
defined in these plans, the Board has the discretion to take certain actions
such as the conversion of outstanding options, ESUs and RSUs into options, ESUs
and RSUs under similar plans of a publicly traded successor corporation, the
vesting of all unvested options, ESUs and RSUs, or the provision of cash or
other consideration in exchange for cancelling outstanding options, ESUs and
RSUs. If the Board decides not to take any of the discretionary permitted
actions, then the outstanding options, ESUs and RSUs will vest as set out for
each defined change of control. For details, see the description of the
Management Plan on page 38.
In addition, for any participant whose employment is terminated without cause
or who dies while employed by the Company within two years of the change of
control, his or her unvested options issued before the change of control will
immediately vest and be exercisable for 90 days after the termination of
employment (or 12 months after death).
A full description of the change of control provisions, when they may be
triggered under the Management Plan, and the Board's discretion relating to
them, is set out on pages 39 and 40 of this circular. Equivalent provisions
appear in the ESU Plan and RSU Plan.
Before recommending its adoption to the Board, the Compensation Committee
conducted an extensive review of the appropriate treatment of incentives upon a
change of control. Change of control provisions are designed to provide clarity
to plan participants and the Board on what will occur upon a change of control,
help management to stay focused on the best interests of the shareholders, and
provide the Board with general principles for treating longer term incentives
upon a change of control. Prior to these changes, the Management Plan already
provided to the Board the ability to accelerate vesting of these incentives in
their discretion, which included change of control. These changes provide more
clarity on the subject. As part of its deliberations, the Compensation
Committee conducted a careful review of market practices and received the
advice of both the compensation consultant and independent legal counsel
engaged by the Compensation Committee to advise on its duties in considering
such a provision as well as the fairness of the proposed terms among market
practice. The Compensation Committee concluded that the terms fairly balanced
the interests of management and shareholders and were not excessive compared to
market practice.
2006 performance
For 2006, the Compensation Committee has continued with a rigorous,
comprehensive and holistic approach towards the assessment of the performance
of the executive leadership team applying the principles described above.
This philosophy results in a high focus on performance driving pay with base
salary comprising approximately 24 per cent of total compensation for the
executive team overall for 2006.
Base salary
For 2006, two of the named executives received a base salary increase in
recognition of the increasing complexity of that individual's responsibilities,
breadth of knowledge and market competitiveness, in accordance with policies
and approvals established by the Compensation Committee.
At-risk incentive pay
The at-risk incentive pay has three components:
1. Annual variable pay plan
For 2006, the corporate performance targets were tied to profitable growth,
customer excellence, business efficiency and effectiveness, and team
engagement. The overall result achieved was slightly below target at 0.93
against target performance of 1.0. The average of all business unit results was
slightly below target performance of 1.0.
To determine the personal performance component of the incentive awards of the
executive vice-presidents, the CEO evaluated their achievements and determined
their corresponding PVAAM ratings. He then presented to the Compensation
Committee the possible range of each component of at-risk pay that may be
awarded based on such PVAAM ratings together with his recommendations on the
total annual incentive award for each executive vice-president. The
Compensation Committee reviewed the CEO's recommendations and determined the
annual incentive payments of each executive vice-president. Payout on the
individual component of performance can range from zero for substandard
performance up to a maximum of 200 per cent for exceptional performance.
The following chart outlines the key metrics and highlights the corporate
results achieved for 2006:
_____________________________________________________________________________________________________
Objectives Performance metrics Highlights of 2006 results
_____________________________________________________________________________________________________
Profitable - Revenue Overall the objectives were exceeded.
growth - Free Cash Flow Wireless revenue and EPS were
(30%) - Earnings per Share (EPS) particularly strong.
_____________________________________________________________________________________________________
Customer - Client churn Overall these objectives were not fully
excellence - Subscriber additions and met. Reasonable results were achieved
(30%) Network access line in churn, subscriber additions and
(NAL) losses NAL losses. A series of extreme
- Customer service indices weather events in B.C. resulted in
including delivery, loyalty some customer service challenges.
and quality
_____________________________________________________________________________________________________
Business - Wireline earnings before Overall these objectives were
efficiency & interest and taxes (EBIT) exceeded. Wireline EBIT was
effectiveness before restructuring particularly strong while increased
(30%) - Wireless EBIT competitive pressure resulted in higher
- Cost of Acquisition (COA) than expected COA.
_____________________________________________________________________________________________________
TELUS - Team member engagement Overall the target was not fully met.
Team index Results in spring Pulsecheck e-survey
(10%) showed improvement since the 2005
labour disruption, but with room to
improve in future.
_____________________________________________________________________________________________________
For 2006, the overall annual variable pay results for the executive leadership
team members averaged 26 per cent of base salary. The corporate balanced
scorecard component of their variable pay was 93 per cent of their target award
for that component. Comparing the 2006 actual results against comparable 2005
corporate scorecard measures would have resulted in a variable pay payout of 97
per cent for that component. This reduction is reflective of increased
performance expectations that are the foundation to the pay-for-performance
philosophy, and demonstrated the stretch targets in the 2006 corporate
scorecard over the 2005 corporate scorecard.
TELUS performance comparisons
The Compensation Committee considered other performance results achieved by the
Company, in 2006 and over a five-year period, that benefited shareholders.
TELUS produced top-quartile financial growth results among global incumbent
telecommunications peers and increasing share prices for the fourth year in a
row. TELUS also generated strong cash flow that allowed the Company to return
capital to investors in the form of three successive dividend increases of 33,
38 and 36 per cent and three successive programs to repurchase TELUS shares, as
well as a significant early debt retirement. An investment in TELUS common
shares, with a 121 per cent increase over the past five years, significantly
outperformed an investment in a global index of telecom stocks.
2. Medium-term incentives
In 2006, the Compensation Committee continued with the ESU Plan. The number of
ESUs granted for 2006 to each executive leadership team member was calculated
based on the individual's annual incentive award and the share price
performance of non-voting shares during 2006 as described previously. Each
award was determined and approved by the Compensation Committee. The value of
ESUs allocated in 2007 for 2006 performance was $53.41 per ESU and was
calculated based on the weighted average trading price of the non-voting shares
for the 15 trading days preceding December 31, 2006, which was higher than the
price for the 15 trading days preceding January 1, 2006.
3. Long-term incentives
Overall, the Compensation Committee recommended and the Board approved
long-term incentives that represented 48 per cent of total compensation for the
executive team in 2006, with the result that total overall at-risk pay
accounted for 76 per cent of total compensation for the executive team.
To provide a more appropriate mix of long-term incentives, the February 2007
long-term incentive compensation grant was split between share options and RSUs
under the RSU Plan. This split represents an approximate allocation of one-half
options and one-half RSUs to the executive leadership team (excluding the CEO)
on a collective basis, based on an estimated after-tax equivalency between the
value of the RSUs and the value of the options to be granted, using a
Black-Scholes valuation. To strengthen retention, the options granted in
February 2007 will cliff-vest in three years from the grant date and the RSUs
will vest at or near the end of the second year after the year of allocation.
The term of stock options granted in 2007 is seven years.
CEO compensation
The principles used for determining the compensation of the CEO, Darren
Entwistle, were identical to those established for the other executives, other
than as noted previously or in this section.
The CEO's base salary was approved in 2005 for increase effective January 1,
2006 where it still remained below the median of the selected comparator group.
Given his already significant ownership in TELUS shares, the Compensation
Committee recommended and the Board approved an all-cash annual and medium-term
variable pay award to the CEO for 2006 performance, and accordingly, no ESUs
were awarded to him.
Based on the CEO's personal performance results, corporate and business unit
performance results, the Board awarded to Mr. Entwistle an overall annual and
medium-term variable pay award that totaled 1.15 times his base salary and a
long-term incentive award of $3,800,000.
The overall annual and medium-term variable pay awards to the other named
executives ranged from 0.96 to 1.03 of their base salaries, and their long-term
incentive awards ranged from $700,000 to $825,000.
Share ownership guidelines
Share ownership guidelines were introduced for the executive leadership team
members in 2002 to provide a further link between the interest of executives
and shareholders, thereby demonstrating the ongoing alignment of executives'
interests with the interests of shareholders.
Until 2006, the share ownership targets were three times annual base salary for
the CEO and two times annual base salary for the executive vice-presidents.
In 2006, the Compensation Committee approved a change to the definition of
share ownership to exclude RSUs and ESUs from the definition. The share
ownership target is now determined solely on the basis of the number of Company
shares beneficially owned directly or indirectly. Shares purchased by the
executive using his or her own funds more precisely and demonstrably measures
each executive's commitment to the Company through chosen investment in the
Company.
As a result of this change in the definition of share ownership, the guidelines
for executive vice-presidents have also been revised to reflect the exclusion
of non-share equities. The revised guidelines must be met by year-end 2008 and
they are outlined below:
_____________________________________________________________________
Current share ownership guidelines
_____________________________________________________________________
CEO 3x annual base salary
_____________________________________________________________________
Executive Vice-Presidents 1x annual base salary
_____________________________________________________________________
The Company prohibits executive leadership team members and certain senior
management from engaging in short selling or trading in puts, calls or options
in respect of TELUS securities.
Executive shareholdings summary table
The following table lists total TELUS shareholdings held by each named
executive (as set out in the executive compensation summary table on page 32),
dollar value of shareholdings and share ownership level (dollar value to base
salary ratio), as at December 31, 2006 (see share ownership guidelines above).
______________________________________________________________________________________________________________________
Name TELUS equity Dollar value of Dollar
value of Share
(common shares/non-voting equity ($)(2) shareholdings ($)(3) ownership level as a
Shares/ESUs/RSUs) (1) multiple of
base salary
______________________________________________________________________________________________________________________
Darren Entwistle 12,984/184,807/5,042/193,580 20,644,702 10,310,411 8.74
Robert McFarlane 0/113,729/5,620/30,950 7,820,039 5,896,507 11.83
Joe Grech 12,517/13,677/8,282/29,591 3,351,762 1,381,523 3.45
Joe Natale 6,416/6,325/7,183/33,787 2,804,155 672,473 1.28
John Watson(4) 1,030/930/4,563/34,320 2,126,661 103,513 0.26
______________________________________________________________________________________________________________________
(1) Excludes any TELUS non-voting shares that may be acquired by an executive in
2007 in payment of ESUs that vested in 2006.
(2) At the close of trading on December 31, 2006 the market price of common shares
was $53.52 and the market price of the non-voting shares was $52.03.
(3) Excludes all RSUs and ESUs.
(4) John Watson joined the executive leadership team in 2005. His shareholding
exceeded the ownership target under the former definition, and he has until
year-end 2008 to meet the target under the new definition.
In December 2006, Mr. Entwistle announced publicly that he sold 167,500 TELUS
shares to facilitate personal estate planning. Following the sale, Mr.
Entwistle owned 197,791 TELUS shares which represented 8.74 times his annual
base salary and far exceeded his share ownership target.
Conclusion
The Compensation Committee believes that the various components of compensation
are appropriately balanced to provide direction and motivation for the
executive leadership team to make a positive contribution to the Company's
overall success, thereby enhancing the value of the Company for its
shareholders.
Signed, members of the Human Resources and Compensation Committee
s/s John S. Lacey s/s Donald P. Woodley
______________________________ ______________________________________
John S. Lacey (Chair) Donald P. Woodley
s/s R.H. (Dick) Auchinleck
__________________________________
R.H. (Dick) Auchinleck
Executive compensation summary table
The following table lists total compensation for the named executive officers,
and is a condensed summary of the remaining tables provided in this and
previous information circulars.
__________________________________________________________________________________________________________
Darren Entwistle Robert McFarlane
President & Chief Executive Officer Executive Vice-President & CFO
__________________________________________________________________________________
2006 2005 2004 2006 2005 2004
__________________________________________________________________________________________________________
Cash
Salary $1,180,000 $970,000 900,000 $500,000 $450,000 $400,000
Bonus 1,351,100 1,200,000 508,500 257,563 230,850 215,600
Other 48,300 149,635 127,084 7,667 17,250 59,200
Total cash 2,531,100 2,319,635 1,535,584 765,230 698,100 674,800
__________________________________________________________________________________________________________
Equity
ESUs 508,500 257,563 230,850 215,600
Stock options1 - 2,000,000 - 387,500 1,041,666 252,472
RSUs 3,800,000 4,473,780 3,154,033 387,500 708,316 539,286
Total equity 3,800,000 6,473,780 3,662,533 1,032,563 1,980,832 1,007,358
__________________________________________________________________________________________________________
Total direct
compensation 6,331,100 8,793,415 5,198,117 1,797,793 2,678,932 1,682,158
__________________________________________________________________________________________________________
Pension service
& compensation cost 391,000 223,000 216,000 316,000 109,000 94,000
__________________________________________________________________________________________________________
Total $6,772,100 $9,016,415 $5,414,117 $2,113,793 $2,787,932 $1,776,158
__________________________________________________________________________________________________________
1 Stock Options value represents Black-Scholes value
______________________________________________________________________________________________________________________________
Joe Natale Joe Grech John Watson
Executive Vice-President Executive Vice-President Executive Vice-President
& President, & President, & President,
Business Solutions Network Operations Consumer Solutions
_______________________________________________________________________________________________________________________________
2006 2005 2004 2006 2005 2004 2006 2005 2004
_______________________________________________________________________________________________________________________________
Cash
Salary $525,000 $525,000 $480,000 $400,000 $400,000 $350,000 $400,000 $349,736 $311,731
Bonus $267,750 $269,325 $210,480 $191,250 $205,200 $181,388 $191,400 $266,645 $176,505
Other -- $36,225 $18,400 $15,333 $29,133 $12,075 $176,195 $100,000 $23,460
Total cash $792,750 $830,550 $708,880 $606,583 $634,333 $543,463 $767,595 $716,381 $511,696
_______________________________________________________________________________________________________________________________
Equity
ESUs $267,750 $269,325 $210,480 $191,250 $205,200 $181,388 $191,400 $186,523 $177,514
Stock Options1 $412,500 $1,079,166 $279,048 $350,000 $875,000 $255,794 $350,000 $1,316,666 $207,625
RSUs $412,500 $749,214 $681,592 $350,000 $626,623 $602,992 $350,000 $1,183,334 $307,666
Total equity $1,092,750 $2,097,705 $1,171,120 $891,250 $1,706,823 $1,040,174 $891,400 $2,686,523 $692,805
_______________________________________________________________________________________________________________________________
Total direct
compensation $1,885,500 $2,928,255 $1,880,000 $1,497,833 $2,341,156 $1,583,637 $1,658,995 $3,402,904 $1,204,501
_______________________________________________________________________________________________________________________________
Pension service
& compensation
cost $155,000 114,000 $101,000 $123,000 $162,000 $157,000 $19,000 $18,000 $16,500
_______________________________________________________________________________________________________________________________
Total $2,040,500 $3,042,255 $1,981,000 $1,620,833 $2,503,156 $1,740,637 $1,677,955 $3,420,904 $1,221,001
_______________________________________________________________________________________________________________________________
1 Stock Options value represents Black-Scholes value
In accordance with executive compensation reporting requirements of applicable
securities regulations, the following table provides information concerning the
total compensation paid during the last three fiscal years ending December 31,
2006 to the CEO and the Executive Vice-President and CFO of the Company, and
the three other executive officers employed by the Company as at December 31,
2006 who had the highest individual aggregate annual salary and bonuses for
2006 (collectively with the CEO and CFO, the "named executives"). The figures
shown for each of the three years represent those amounts paid by the Company
to the named executives.
_______________________________________________________________________________________________________________________________
Annual compensation Longer-term compensation All other
_________________________________________________________________________________________ compensation
Name and principal Year Salary Bonus (1) Other annual Number of Restricted
position ended ($) ($) compensation securities stock units
Dec. 31 (2) under (ESUs/RSUs)
($) options (4) (5)
granted(3) ($)
_______________________________________________________________________________________________________________________________
Darren Entwistle 2006 $1,180,000 $1,351,100 - -- 3,800,000 --
President & CEO 2005 970,000 1,200,000 90,142(6) 140,200 4,473,780 59,493(7)
2004 900,000 508,500 92,584(6) -- 3,662,533 34,500(7)
_______________________________________________________________________________________________________________________________
Joe Grech 2006 $400,000 $191,250 -- 19,500 $541,250 $15,333(7)
Executive Vice- 2005 400,000 205,200 -- 55,450 831,823 29,133(7)
President,Network 2004 350,000 181,388 -- 15,400 784,380 12,075(7)
Operations
_______________________________________________________________________________________________________________________________
Robert McFarlane 2006 $500,000 $257,563 -- 21,600 $645,063 $7,667(7)
Executive Vice 2005 450,000 230,850 -- 69,880 939,166 17,250(7)
-President & Chief 2004 400,000 215,600 -- 15,200 754,886 9,200(7)
Financial Officer 50,000(8)
_______________________________________________________________________________________________________________________________
Joe Natale 2006 $525,000 $267,750 -- 23,000 680,250 --
Executive Vice- 2005 525,000 269,325 -- 67,770 1,018,539 36,225(7)
President & 2004 480,000 210,480 -- 16,800 892,072 18,400(7)
President,
Business Solutions
_______________________________________________________________________________________________________________________________
John Watson 2006 400,000 191,400 -- 19,500 541,400 100,000(10)
Executive 62,395(11)
Vice-President 13,800(7)
& President, 2005 349,736 266,645 -- 81,450 1,369,857 100,000(10)
Consumer 2004 311,731 176,505 -- 12,500 485,180 23,460(7)
Solutions(9)
_______________________________________________________________________________________________________________________________
(1) Represents variable "at-risk" component of cash compensation earned under
the annual variable pay plan. Amounts are paid in first quarter of the
following year.
(2) Except as noted, the value of perquisites and other personal benefits
received by the named executives is no greater than the lesser of $50,000
and 10 per cent of annual salary and bonus of the respective named executives.
(3) Annual option grants under the TELUS Management Share Option Plan awarded
to the named executives in relation to the 2006 financial year were
approved by the Compensation Committee and the Board on February 13 and 14,
2007. The 2005 grants include options grants approved in November 2005 and
made in either 2005 or 2006 with respect to the wireline wireless merger, and
the recognition award in February 2006 to the CEO.
(4) The aggregate number of ESUs/RSUs (including accrued dividend equivalents)
held by the named executives at December 31, 2006, their value at the date
of allocation (excluding accumulated dividend equivalents), their value at
closing market price at December 31, 2006, and their vesting are as follows:
___________________________________________________________________________________________________
Number of Value at date Value at December Vesting
ESUs/RSUs of grant 31, 2006 2007/2008
(ESU Plan / RSU
Plan )
___________________________________________________________________________________________________
Darren Entwistle 5,042 / 193,580 $7,613,312 $10,334,290 93,228/105,394
___________________________________________________________________________________________________
Joe Grech 8,828 / 29,591 1,454,867 1,970,506 20,851/17,021
___________________________________________________________________________________________________
Robert McFarlane 5,620 / 30,950 1,435,565 1,902,719 18,717/17,958
___________________________________________________________________________________________________
Joe Natale 7,183 / 33,787 1,545,647 2,131,680 21,385/19,585
___________________________________________________________________________________________________
John Watson 4,563 / 34,320 1,575,348 2,023,124 13,841/25,099
___________________________________________________________________________________________________
Note that the figures in the above table exclude ESU/RSUs which vested on
or before December 31, 2006 that were not paid out until 2007 and exclude
ESUs/RSUs allocated in 2007. The details of the ESU and RSU plans are
disclosed in the Report on Executive Compensation.
(5) The annual ESU/RSU allocations in the Summary Compensation Table are made
in February of the following year. Therefore, the annual grants shown for
2006 were made in February 2007. The 2005 allocations include RSU
allocations with respect to the wireline-wireless merger that were approved
in 2005 and made in either 2005 or 2006 (all numbers include accumulated
dividend equivalents), and the CEO recognition award that was approved and
granted in February 2006.
(6) Consists of $50,000 bonus paid to allow executive to repay Company loan in
that amount, deemed interest on interest-free Company loan and bonus in an
amount sufficient to cover the taxes on both the loan repayment bonus and
the deemed interest. This loan was fully repaid in 2005.
(7) Payment in lieu of accrued but unused vacation.
(8) Bonus paid in recognition of overall accomplishments during the year.
(9) John Watson joined the Executive Leadership Team on April 12, 2005.
(10) First and second installment of bonus paid upon appointment to the
Executive Leadership Team.
(11) Relocation expense taxable benefit.
Options granted for the most recently completed financial year
As noted previously, in order to provide a more appropriate mix of long-term
and medium-term incentives, the February 2007 grant for 2006 performance was
split between share options and RSUs. This split represents an approximate
allocation of one-half options and one-half RSUs among the executive leadership
team (other than the CEO) on a collective basis using a Black-Scholes
valuation. In addition, in order to strengthen retention the options and RSUs
granted in February 2007 will in most instances cliff-vest at or near the end
of a three-year period.
In order to provide comprehensive and up-to-date information, the Company has
set forth in the table below option grants made in the current year.
Accordingly, the following option grants to the named executives were approved
and made in February 2007 with respect to 2006 performance.
The following option grants to the named executives were made in February 2007
based on 2006 performance. This has the impact of reducing share reserves
available for future grant by approximately one per cent.
_______________________________________________________________________________________________________________________________
Name Securities % of total Exercise or base Market value of Expiration date
under options options price ecurities underlying
granted (1) (#) granted to ($/security) (2) options on the date of
employees grant ($/security) (3)
in financial year(1)
_______________________________________________________________________________________________________________________________
Darren Entwistle -- 0.0% -- -- -
Robert McFarlane 21,600 1.8% $56.61 $55.38 February 28, 2014
Joe Grech 19,500 1.6% $56.61 $55.38 February 28, 2014
Joe Natale 23,000 1.9% $56.61 $55.38 February 28, 2014
John Watson 19,500 1.6% $56.61 $55.38 February 28, 2014
(1) All grants are in respect of non-voting shares. Percentage refers to
percentage of total grant of TELUS share options.
(2) TELUS options are granted at the arithmetic average of the daily weighted
average trading price on the TSX (excluding certain block trades and trades
after a certain time in the day) for the five trading days before the grant
date
(3) Actual weighted average trading price on the date of grant.
Aggregated options exercised during the most recently completed financial year
and financial year-end option values for the named executives
_______________________________________________________________________________________________________________________________
Name Securities Aggregate Unexercised Value of unexercised in
acquired value options at fiscal year-end (1) the money options at
on realized (#) exercisable/unexercisable fiscal year-end
exercise ($) ($)
(#) exercisable/unexercisable
_______________________________________________________________________________________________________________________________
Common shares/ Common shares/
Non-voting shares Non-voting shares
Darren Entwistle 54,418 1,748,641 -- / -- 0 / 180,200 -- 2,361,214
Robert McFarlane 5,500 262,795(2) 128,958 /138,609 0 / 85,080 5,713,902 749,058
Joe Grech 81,010 1,300,424 0 / 23,333 0 / 82,550 867,288 1,004,152
Joe Natale - - 0 / 100,000 0 / 100,370 2,962,000 1,226,919
John Watson 24,694 477,850 26,184 / 0 0 / 106,450 401,401 1,154,709
(1) At the close of trading on December 31, 2006, the market price of the
common shares was $ 53.52 and the market price of the non-voting shares
was $52.03.
(2) Mr. McFarlane donated the net proceeds to charity.
TELUS Pension Plan
The TELUS Supplementary Retirement Arrangement ("SRA") establishes an overall
retirement income benefit, which provides supplemental pension benefits to be
paid to a retired executive in addition to the pension income under the
existing registered company pension plans.
Named executives, other than John Watson, participate in the Company's
contributory registered pension plans. The SRA for the participating named
executives supplements these plans by providing a total benefit at retirement
determined as two per cent of a person's highest consecutive three years'
average pensionable remuneration times the total number of years of credited
service to a maximum of 35. Pensionable remuneration is base salary increased
by a fixed 50 per cent for annual variable compensation to the participating
named executives other than the CEO, and by 60 per cent for the CEO. The
following table shows the total of the annual retirement benefits, payable from
both the SRA and registered pension plans, assuming retirement at age 60 or
over:
Pension plan table
2006
______________________________________________________________________________
Remuneration ($) Years of service
15 20 25 30 35
500,000 150,000 200,000 250,000 300,000 350,000
550,000 165,000 220,000 275,000 330,000 385,000
600,000 180,000 240,000 300,000 360,000 420,000
650,000 195,000 260,000 325,000 390,000 455,000
700,000 210,000 280,000 350,000 420,000 490,000
750,000 225,000 300,000 375,000 450,000 525,000
800,000 240,000 320,000 400,000 480,000 560,000
850,000 255,000 340,000 425,000 510,000 595,000
900,000 270,000 360,000 450,000 540,000 630,000
950,000 285,000 380,000 475,000 570,000 665,000
1,000,000 300,000 400,000 500,000 600,000 700,000
1,050,000 315,000 420,000 525,000 630,000 735,000
1,100,000 330,000 440,000 550,000 660,000 770,000
1,150,000 345,000 460,000 575,000 690,000 805,000
1,200,000 360,000 480,000 600,000 720,000 840,000
1,250,000 375,000 500,000 625,000 750,000 875,000
1,300,000 390,000 520,000 650,000 780,000 910,000
1,350,000 405,000 540,000 675,000 810,000 945,000
1,400,000 420,000 560,000 700,000 840,000 980,000
1,450,000 435,000 580,000 725,000 870,000 1,015,000
1,500,000 450,000 600,000 750,000 900,000 1,050,000
1,550,000 465,000 620,000 775,000 930,000 1,085,000
1,600,000 480,000 640,000 800,000 960,000 1,120,000
1,650,000 495,000 660,000 825,000 990,000 1,155,000
1,700,000 510,000 680,000 850,000 1,020,000 1.190,000
1,750,000 525,000 700,000 875,000 1,050,000 1,225,000
1,800,000 540,000 720,000 900,000 1,080,000 1,260,000
1,850,000 555,000 740,000 925,000 1,110,000 1,295,000
1,900,000 570,000 760,000 950,000 1,140,000 1,330,000
1,950,000 585,000 780,000 975,000 1,170,000 1,365,000
2,000,000 600,000 800,000 1,000,000 1,200,000 1,400,000
2,050,000 615,000 820,000 1,025,000 1,230,000 1,435,000
2,100,000 630,000 840,000 1,050,000 1,260,000 1,470,000
2,150,000 645,000 860,000 1,075,000 1,290,000 1,505,000
2,200,000 660,000 880,000 1,100,000 1,320,000 1,540,000
2,250,000 675,000 900,000 1,125,000 1,350,000 1,575,000
2,300,000 690,000 920,000 1,150,000 1,380,000 1,610,000
(1) The compensation covered by the SRA for each of the participating named
executives is based on his respective salaries shown in the executive
summary compensation table plus 60 per cent for the CEO and 50 per cent
for each of the other participating named executives.
(2) The benefits under the registered pension plans and the SRA are payable
for a member's lifetime with a 60 per cent benefit payable to the
surviving spouse.
(3) The pension at retirement, at age 60 with less than 15 years' service,
will be reduced.
(4) The above benefits are not offset by any CPP/QPP payments.
The years of credited service as of December 31, 2006 for pension plan purposes
for the participating named executives are as follows: Darren Entwistle, six
years and ten months; Robert McFarlane, eight years and two months; Joe Natale,
three years and ten months; and Joe Grech, eleven years and three months. Mr.
Grech accrued an additional five years of pensionable service during his first
five years of employment. Mr. McFarlane is accruing two years of pensionable
service for each year from January 1, 2005 to January 1, 2010. Mr. Entwistle
and Mr. Natale are each accruing two years of pensionable service for each year
from September 1, 2006 to September 1, 2011.
The following estimated pension service costs, accrued pension obligations and
annual pension benefits under the Company's pension plans are being disclosed
by the Company on a voluntary basis.
Executive retirement income value disclosure (1)
___________________________________________________________________________________________________
2007 Accrued obligations at Annual pension
Name service costs December 31, 2006 ($)(3) benefits payable
($)(2) at age 60 ($)(4)
___________________________________________________________________________________________________
Darren Entwistle 798,000 2,727,000 1,025,800
___________________________________________________________________________________________________
Robert McFarlane 322,000 1,316,000 368,800
___________________________________________________________________________________________________
Joe Natale 315,000 604,000 405,600
___________________________________________________________________________________________________
Joe Grech 126,000 1,414,000 321,000
___________________________________________________________________________________________________
(1)Amounts shown include pension benefits under the Company's registered
pension plan and SRA.
(2)Service cost is the value of the projected pension earned for pensionable
service in 2007. The value has been determined using the same actuarial
assumptions as those used to determine the year-end pension plan
obligations disclosed in the notes to the 2006 consolidated financial
statements. For Mr. Entwistle, Mr. McFarlane and Mr. Natale, the service
cost is the cost in 2007 for two years of pensionable service credit.
(3)Accrued obligations are the actuarial value of projected obligations for
service to December 31, 2006. The value has been determined using the
same actuarial assumptions as those used to determine the year-end
pension plan liabilities disclosed in the notes to the 2006 consolidated
financial statements.
(4)Amounts in this column are based on 2007 compensation levels and assume
accrued years of service to age 60 for each of the named executives.
Employment agreements
TELUS is a party to executive employment agreements for an indefinite term with
each of the named executives. The agreements provide that if the employment of
the executive were terminated at any time other than for just cause or by
reason of death, disability or retirement ("without cause"), the executive will
be paid a severance payment, receive continued benefit coverage and be credited
with continued accrual of pensionable service as follows: for Darren Entwistle,
Robert McFarlane and Joe Grech - severance equal to two times annual
compensation and two years of benefit continuation and pension credit; for Joe
Natale - severance equal to one and one half times annual compensation and
eighteen months of benefit continuation and pension credit; and for John Watson
- severance equal to one and one half times annual compensation and eighteen
months of benefit continuation. Each agreement contains a prohibition on the
improper disclosure or use of confidential information and a one-year
non-competition restriction after termination.
The agreements with Messrs. Entwistle, McFarlane, Natale and Grech provide that
they will be accruing two years of pensionable service under the SRA for each
full year of employment, in the following time periods:
Named executive Employment period
_______________ __________________
D. Entwistle September 1, 2006 to September 1, 2011
R. McFarlane January 1, 2005 to January 1, 2010
N. Natale September 1, 2006 to September 1, 2011
J. Grech November 1, 2000 to November 1, 2005
Under his agreement, Darren Entwistle received a $250,000 interest-free
forgivable loan net of tax obligations at the commencement of his agreement, of
which $50,000 was forgiven in each year from 2001 to 2005 inclusive. This loan
was fully extinguished in 2005.
In 2006, the employment contracts of Mr. Entwistle and Mr. Natale were each
amended to provide for a pension service credit enhancement, on the basis of
one year for each additional year over the next five years. The additional
service would not be counted for purposes of determining early retirement
discounts to pension and would not be used for any other non-pension related
items that might be dependent on service.
In 2006, with the approval of the Board based on the recommendation of the
Compensation Committee, the employment contract of Mr. Entwistle was further
amended to provide that upon a change of control as defined in the same manner
as the Management Plan, all of the then unvested stock options, ESUs and RSUs
issued to Mr. Entwistle will vest immediately. Change of control was defined to
specifically exclude conversion of the Company into an income trust. In its
deliberations, the Compensation Committee considered industry practices
provided by the compensation consultant, and concluded that such an arrangement
is within industry norm for CEOs and is appropriate.
Performance graph
The following graph compares the yearly change over the past five years in the
cumulative total shareholder return on the common shares and non-voting shares
of TELUS with the cumulative total return on the S&P/TSX Composite Index,
assuming a $100 investment on December 31, 2001 and reinvestment of dividends.
( GRAPH )
____________________________________________________________________________________________________________________
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003 Dec 31, 2004 Dec 31, 2005 Dec 31, 2006
____________________________________________________________________________________________________________________
TELUS common shares 100 75 115 164 221 253
____________________________________________________________________________________________________________________
TELUS non-voting shares 100 73 112 166 227 259
____________________________________________________________________________________________________________________
S&P/TSX Composite Index 100 88 111 127 158 185
____________________________________________________________________________________________________________________
Indebtedness of directors and officers
No director or officer of the Company or proposed nominee for election as a
director of the Company, or any associate thereof, is or has been indebted to
the Company or its subsidiaries since January 1, 2006. In compliance with the
July 30, 2002 enactment of the Sarbanes-Oxley Act, no new personal loans to
directors and executive officers were made or arranged, and no pre-existing
personal loans were renewed or modified, since July 30, 2002.
The Company from time to time has notional indebtedness outstanding for brief
periods from non-executive team members with respect to the cashless exercise
of their options.
Securities authorized for issuance under Equity Compensation Plans
The Company has a number of equity compensation plans, but the only continuing
equity compensation plan of the Company under which equity shares may be issued
from treasury on the exercise of options is the TELUS Management Share Option
Plan (the "Management Plan"). As of December 31, 2006, the dilution as a result
of total share option reserves was approximately 5.7% of all outstanding common
and non-voting shares.
Options remain outstanding under the Directors Share Option and Compensation
Plan (the "Directors Plan"). But as reported below, the Board discontinued the
option program for directors in 2003 and no further options have been granted
to directors since then. This plan now provides for the issuance of deferred
share units ("DSUs") to directors. In February 2006, the Board determined that
all obligations to deliver non-voting shares to satisfy the payment of DSUs
under this plan will be met through market purchase and not through issuance
from treasury.
Options also remain outstanding under the TELUS Corporation Employee Stock
Option Plan (the "Team TELUS Plan"). This plan was established to grant options
to most employees of the Company and its subsidiaries. In 2004, this option
program was completed and further option grants under this plan were
discontinued.
In addition to the foregoing, there are options outstanding entitling holders
to acquire shares of the Company under the BC TELECOM Share Option Plan (the
plan that was in place prior to the merger of predecessor Alberta-based TELUS
Corporation and BC TELECOM Inc. in 1999) and under the TELUS Share Option Plan
for Former Clearnet Optionholders (the plan that was put in place for employees
of Clearnet Communications Inc. ("Clearnet") upon the acquisition of Clearnet
by the Company in 2000). No further options are being issued under these plans.
The following table provides information as at December 31, 2006 with respect
to shares of the Company authorized for issuance under equity compensation
plans that permit issuance from treasury.
________________________________________________________________________________________________________
Number of securities
remaining available for
future issuance under
Plan category Number of securities to Weighted-average equity compensation
be issued upon exercise exercise price of plans (excluding
of outstanding options outstanding options securities in column A)
(#) ($) (#)
A B C
________________________________________________________________________________________________________
Equity compensation 877,670 36.78 Nil
plans approved by
securityholders
________________________________________________________________________________________________________
Equity compensation 9,691,792 30.98 8,754,745
plans not approved
by securityholders
________________________________________________________________________________________________________
Total 10,569,462 31.46 8,754,745
________________________________________________________________________________________________________
Stock option plans
TELUS Management Share Option Plan
The Management Plan was established in 2005 as part of the separation of the
original TELUS Share Option and Compensation Plan into the Directors Plan and
the Management Plan. The purpose of the Management Plan is to strengthen
retention of key management employees, to align their interests with those of
shareholders and to provide incentive compensation based on the value of
non-voting shares. As at March 9, 2007, there were options outstanding under
the Management Plan to purchase 690,931 common shares and 7,822,184 non-voting
shares representing 2.5 per cent of the issued and outstanding equity shares of
the Company. Of these options outstanding, 333,339 options for common shares
and 1,623,293options for non-voting shares or 0.6 per cent of the total number
of options outstanding under the plans were held by insiders (as that term is
defined under applicable securities law).
Options are granted under the Management Plan to eligible employees as
determined by the Compensation Committee. Eligible employees are generally
senior managers or key management employees and include approximately 3609
employees of the Company and its subsidiaries. The Compensation Committee
approves the total number of options to be granted to executive management on
the recommendation of the CEO as part of the Committee's approval of executive
compensation, while the Board approves the total number of options to be
granted to the CEO on the recommendation of the Compensation Committee as part
of the Board's approval of CEO compensation. The CEO may determine the total
number of options to be granted to non-executive management. The Management
Plan provides that the number of non-voting shares to be optioned to any
participant under the Management Plan, together with any other equity
compensation plan for employees, cannot exceed five per cent of the outstanding
equity shares. In addition, a majority of the options granted under the
Management Plan cannot be granted to insiders and insiders as a group are not
permitted to hold options under the Management Plan that, together with options
under any other equity compensation plans of the Company, exceed 10 per cent of
the Company's issued and outstanding shares.
Under the Management Plan, options may be issued with vesting provisions as
determined upon granting, and if not determined, the plan provides that options
cliff-vest on the third anniversary of the date of grant.
Until November 2006, the exercise price under the Management Plan was the
weighted average trading price of the non-voting shares (or common shares for
options granted prior to 2001) on the last business day before the grant date.
Currently, the exercise price is the arithmetic average of the daily weighted
average trading price on the TSX (excluding certain block trades and trades
after a certain time in the day) for the five trading days before the grant
date. The current formula is the same as the formula for determining the
allocation price of RSUs. This change in the option exercise price was made in
2006 to better reflect market value (a five-day average is more likely to be
reflective of market than the previous one-day formula) and to promote pricing
consistency among different types of incentives (the new formula is the same as
the RSU formula).
The expiry date for options granted under the Management Plan can be any time
up to 10 years from the grant date. Currently, options are being granted with
an expiry date of seven years from the grant date. Options cannot be
transferred or assigned by a participant.
Options expire under the Management Plan on the earliest of (i) the day of
voluntary termination of employment by a participant (other than termination on
retirement or by reason of disability), unless otherwise determined by the
Compensation Committee; (ii) 90 days after termination by the Company or a
subsidiary of employment without just cause, unless otherwise determined by the
Compensation Committee; (iii) the date of termination of employment of the
participant for just cause; (iv) 12 months following the death of a participant
for vested options and options that vest within that 12 months; or (v) the
expiry date of the option.
For certain options outstanding on January 1, 2001, the Management Plan permits
the participant to elect to receive in cash the difference between the market
price of the common shares under option less the exercise price. The market
price for this purpose is the average trading price on the TSX for the last
business day before the determination of the price. The Company may override
the election and require that the common shares be purchased.
The Management Plan also provides that at the time options are exercised, the
Company may elect to have the options exchanged for a right of the optionholder
to receive non-voting shares or common shares, as the case may be, in
settlement for the options so exchanged. The number of non-voting or common
shares to be issued to the optionholder will be the number obtained by i)
multiplying the number of options exercised by ii) the number obtained when the
difference between the current market price of the shares under option at the
time of exercise and the exercise price is divided by the current market price
of the applicable shares. The options so exchanged are cancelled, and the
number of non-voting shares or common shares determined by the difference
between the number of options exchanged and the number of non-voting shares or
common shares issued in that exchange will be added back to the applicable
reservation of shares under the Management Plan.
The Board, subject to any regulatory or required shareholder approval, has the
power under the Management Plan to amend or terminate the Management Plan at
any time, provided that it will not reduce the rights of a participant that
have accrued before the amendment or termination. This power includes the right
to amend the vesting of any option and the right to extend the expiry date of
any option to a date that is not beyond the original expiry date. Shareholder
approval is required for any amendment to the Management Plan that is
considered material including any increase in the reservation of shares, any
cashless exercise or stock settlement if the shares underlying the options are
added back to the reservation, any change in the exercise price of outstanding
options, and any financial assistance by the Company or increase in
participation by insiders.
2006 amendments to Management Plan
Four amendments to the Management Plan were made in 2006 as outlined below. In
accordance with the rules of the TSX and the amendment provisions of the
Management Plan text noted above, shareholder approval was not required for
these amendments.
Change of control
The Management Plan was amended to incorporate change of control provisions.
"Change of control" is defined to be (i) a sale to or acquisition by persons
not affiliated with the Company of assets of the Company and its subsidiaries
having a value of more than 50 per cent of the fair market value of those
assets on a consolidated basis; (ii) a formal take-over bid being made for
voting securities of the Company; (iii) an acquisition by any persons acting
jointly or in concert of 35 per cent or more of the voting securities of the
Company (excluding acquisitions by a subsidiary, the Company or any
underwriter); (iv) any reorganization, recapitalization, consolidation,
amalgamation, arrangement, merger, transfer, sale, business combination or
other similar transactions involving the Company, its subsidiaries or its
shareholders, where record holders of the voting securities of the Company
immediately before these transactions hold less than 50 per cent of the voting
securities of the Company or of the continuing entity following the completion;
or (v) any transactions that the Board determines to be a change of control.
However, subject to any other Board determination, a change of control
specifically excludes the proposed income trust conversion announced in
September 2006, as well as any transactions where the record holders of the
voting securities of the Company immediately before the transactions continue
to have substantially the same beneficial ownership in an entity that owns,
directly or indirectly, all or substantially all of the assets of the Company
and its subsidiaries immediately after the transactions. "Substantially all of
the assets" is defined to mean assets having a value greater than 90 per cent
of the fair market value of the assets of the Company and its subsidiaries on a
consolidated basis.
Upon a change of control, the Board may take one or more of the following
actions: (i) arrange for the options to be assumed by or similar options be
substituted by the bidder or a continuing entity, subject to satisfying certain
stated criteria; (ii) accelerate the vesting of the options; (iii) make a
determination as to the market price for the purpose of further actions with
respect to the options; (iv) arrange for cash or other compensation in exchange
for a surrender of any options; or (v) make any other determinations as
appropriate.
If the Board does not take any of the above actions, the following will occur
by default: (i) in the event of a takeover bid, all unvested options will vest
for the purpose of a participant exercising the options and depositing the
shares received on exercise to the takeover bid, but any shares not taken up
and paid for will be cancelled and the options will be reinstated as unvested
options; (ii) in any other case, all unvested options will vest.
If the Board does not accelerate unvested options or replacement options upon a
change of control as defined, then with regard to any participant whose
employment is terminated without cause or who dies while employed within two
years of the change of control, the unvested options issued to that participant
before the change of control will immediately vest and be exercisable for 90
days following termination, and for 12 months following death.
Cash settlement feature
A cash settlement feature (the "Cash Settlement Feature") was approved to
permit the Company to allow for cash settlement of designated options. In lieu
of exercising designated options for shares, a participant may elect to
surrender these options after vesting and receive, in cash, an amount equal to
the difference between the market price and the exercise price. The market
price for this purpose is the volume weighted average price of the shares under
option on the TSX (excluding certain block trades and trades after a certain
time in the afternoon), on the business day following the election by the
participant. The surrendered options will be cancelled by the Company and the
shares underlying these options will not be added back to the share
reservation.
Definition of "Market Price"
The definition of market value of a share was amended from a weighted average
price on a day to a weighted average price of the applicable share over a
five-day period excluding certain specified trades and trades after a specified
time, for the reasons outlined on page 39.
Option expiry upon termination of employment without cause
The Company intends for option holders whose employment is terminated by the
Company without cause to have 90 days after their last day of work to exercise
vested options. Previously, the Management Plan specified that options would
expire 90 days after the member is given a notice of termination. The notice
date is not necessarily the last day of work or the employment termination
date. This provision in the Management Plan was amended in 2006 to clarify that
the 90-day period starts from the date of termination of employment as opposed
to the day of notice, to better ensure that team members who work during their
notice period would not lose their vested options prematurely, while avoiding
an unintended extension of the 90-day period by virtue of differences in
severance arrangements.
Directors Share Option and Compensation Plan
As at March 9, 2007, options to purchase a total of 41,650 common shares and
33,000 non-voting shares or 0.02 per cent of the issued and outstanding equity
shares of the Company were outstanding under the Directors Plan. These options
have a 10-year term and an exercise price that is equal to the weighted average
price of the Company's common or non-voting shares, as applicable on the
trading day immediately preceding the date of grant. As previously noted, no
options have been granted under this plan since 2003 and the share reservation
under this plan is only sufficient to meet the exercise of the outstanding
options. Options cannot be transferred or assigned by a participant other than
by will or the laws of succession on devolution.
Under the terms of the Directors Plan, options expire on the earlier of (i) 12
months after the participant ceases to be a director due to death, and (ii) the
expiry date of the option, whether or not the participant has previously ceased
to be a director; provided that if the participant becomes a director, officer
or employee of a competitor after he or she ceases to be a TELUS director, the
options will immediately terminate. For options outstanding on January 1, 2002,
the Directors Plan permits the participant to elect to receive in cash the
difference between the market price of the common shares exercised and the
exercise price. The common shares are not added back to the reservation if this
election were selected. The Company may override the election and require that
the common shares be issued from treasury in their entirety.
The Directors Plan also provides that a participant may elect to receive the
annual retainer and meeting fees paid to that participant in DSUs, shares or
cash. DSUs are credited to an account for a participant based on the weighted
average trading price of non-voting shares (or common shares for DSUs held
before January 2001) on the day the fees are paid. DSUs held for a participant
are credited with dividends paid on the Company's shares, and when paid out,
are paid to a participant at the then market price of the applicable shares, as
determined under the plan. If a participant elects to be paid in shares,
non-voting shares are acquired by the plan administrator in the open market for
the participant. In February 2006, the ability of the Company to issue
non-voting shares from treasury in that circumstance was cancelled.
The Directors Plan was amended in 2006 to add the Cash Settlement Feature. In
accordance with the rules of the TSX and the amendment provisions of the
Directors Plan text noted below, shareholder approval was not required for this
amendment.
The Board of Directors of the Company, subject to any regulatory or required
shareholder approval, has the power under the Directors Plan to amend or
terminate the Directors Plan at any time, provided that the amendment will not
reduce the rights of a participant that have accrued before the amendment or
termination. This power includes the right to amend the vesting of any option
and the right to extend the expiry date of any option to a date that is not
beyond the original expiry date. Shareholder approval is required for any
amendment to the Management Plan that is considered material, including any
increase in the reservation of shares, any cashless exercise or stock
settlement if the shares underlying the options are added back to the
reservation, any change in the exercise price of outstanding options, and any
financial assistance by the Company or increase in participation by insiders.
Team TELUS Plan
In 2001, the Company established the Team TELUS Plan, which provided for 100
options to be granted, from time to time, under the plan to all regular,
part-time, casual and temporary employees of the Company and its subsidiaries,
other than those who were eligible to receive grants under the Management Plan.
In 2001, 11,040,000 non-voting shares representing 3.1 per cent of the
Company's shares issued and outstanding were reserved for issuance under the
plan. As at March 9, 2007, there were 1,915,800 non-voting shares, representing
0.6 per cent of the Company's issued and outstanding shares, to be issued upon
the exercise of outstanding options under the Team TELUS Plan. The Company has
discontinued granting options under this plan after the 2004 grants.
Under the terms of the Team TELUS Plan, all eligible employees received the
same number of options. Options were granted under this plan in 2001, 2002 and
2003. Options granted under the plan have a maximum expiry date of ten years
and an exercise price equal to the weighted average trading price of the
Company's non-voting shares on the trading day immediately before the grant
date. The options have all vested at this time. Options terminate on the
earliest of (i) the day of any voluntary termination of employment by a
participant, or the day a participant is terminated for just cause; (ii) three
years after the date of normal retirement of a participant; (iii) 12 months
after the date of death or disability of a participant; (iv) 90 days after
termination of a participant's employment by the Company or a subsidiary, or
after a subsidiary is sold by the Company; or (v) the expiry date of the
options. Options cannot be transferred or assigned by a participant under the
plan. A participant may not assign any option other than by will or the laws of
succession and devolution.
The Team TELUS Plan was amended in 2006 to add the Cash Settlement Feature. In
accordance with the rules of the TSX and the amendment provisions of the Team
TELUS Plan text noted below, shareholder approval was not required for this
amendment.
Currently, the Board of Directors of the Company, subject to any regulatory or
required shareholder approval, has the power under the Team TELUS Plan to amend
or terminate the Team TELUS Plan at any time, provided that it does not impair
any option previously granted. Effective June 2007, in accordance with TSX
rules, the Board may not amend the Team TELUS Plan without shareholder
approval.
Other existing share equity plans
TELUS Share Option Plan for Former Clearnet Optionholders (the "TELUS/Clearnet
Plan")
When TELUS acquired Clearnet on October 20, 2000 (the "Effective Date"),
holders of options under the Clearnet Communications Inc. Option Plan (the
"Clearnet Plan") were given the right to exchange their options under that plan
for options under the TELUS/Clearnet Plan.
The exercise price of the options was determined by subtracting from (a) the
market price of the non-voting shares of the Company on the Effective Date, (b)
the amount obtained by dividing the difference between the market price of
Clearnet common shares on the Effective Date and the exercise price of the
options under the Clearnet Plan, by 1.636. This exercise price reflected the
exchange ratio at which TELUS acquired the common shares of Clearnet. No
further options are granted under the TELUS/Clearnet Plan. The options under
this plan are not assignable except by the laws of succession and devolution.
As at March 9, 2007 options to purchase 50,531 non-voting shares or 0.02 per
cent of the issued and outstanding shares of the Company were outstanding under
the TELUS/Clearnet plan. The options under the TELUS/Clearnet Plan expire on
the earliest of (i) six months after the date of voluntary termination of
employment by a participant or the date of termination of the participant by
the Company or a subsidiary without just cause; (ii) three years following the
date of normal retirement of a participant, or disability of a participant,
provided it is not beyond the original expiry date; (iii) the date of
termination of employment of a participant for just cause; (iv) 12 months after
the death of a participant; or (v) the original expiry date of the option as
granted by Clearnet (which was 10 years from the date of grant).
The TELUS/Clearnet Plan was amended in 2006 to add the Cash Settlement Feature.
In accordance with the rules of the TSX and the amendment provisions of the
TELUS/Clearnet Plan text noted below, shareholder approval was not required for
this amendment.
The Board, subject to any regulatory or required shareholder approval, has the
power under the TELUS/Clearnet Plan to amend or terminate the TELUS/Clearnet
Plan at any time, provided that it does not impair any option previously
granted. Effective June 2007, in accordance with TSX rules, the Board may not
amend the TELUS/Clearnet Plan without shareholder approval.
BC TELECOM Share Option Plan
At the time of the merger of BC TELECOM Inc. and predecessor Alberta-based
TELUS Corporation in February 1999 (the "Merger"), the options then existing
under the BC TELECOM Share Option Plan ("BC TELECOM Plan") and the TELUS
Corporation Share Option Plan ("TSOP") were converted into options to purchase
common shares and non-voting shares of the Company based on the exchange ratio
for BC TELECOM shares and TELUS shares pursuant to the plan of arrangement. The
exercise prices under the BC TELECOM Plan were determined based on the exchange
ratio and the exercise prices of the granted options under the respective plans
on the effective date of the Merger. No further options are issued under this
plan. All outstanding options granted under the TSOP either expired or were
exercised.
As at March 9, 2007, there were options to purchase 20,205 non-voting shares
and 60,595 common shares outstanding under the BC TELECOM Plan, or 0.02 per
cent of the issued and outstanding shares of the Company. These options expire
at varying dates up to 2008. Under the BC TELECOM Plan, the participants hold
share appreciation rights that entitle them to receive an amount in cash equal
to the difference in the exercise price and the closing price of the applicable
shares of the Company on the day prior to the date of exercise. To the extent
participants exercise the share appreciation rights, the corresponding option
is cancelled. Options and rights under the BC TELECOM Plan are exercisable on
the earliest of (i) 12 months after (a) a participant retires, or (b) a
participant ceases to be an officer or director of the Company, or (c) a
participant's death; (ii) in all other cases other than as set out in (i), on
the day a participant ceases to be an employee, unless otherwise determined by
the Compensation Committee; and (iii) the expiry date of the options. All
options are non-transferable.
The BC TELECOM Plan was amended in 2006 to add the Cash Settlement Feature. In
accordance with the rules of the TSX and the amendment provisions of the BC
TELECOM Plan text noted below, shareholder approval was not required for this
amendment.
Currently, the Board may amend or terminate the plan provided that the
amendment does not, without the consent of the optionee, alter or impair any
options previously granted and the amendment is subject to any required
regulatory approval. Effective June 2007, in accordance with TSX rules, the
Board may not amend the BC TELECOM Plan without shareholder approval.
Interest of certain persons in matters to be acted upon
None of the directors or executive officers of the Company, no proposed nominee
for election as a director of the Company, none of the persons who have been
directors or executive officers of the Company since the commencement of the
Company's last completed financial year, none of the other insiders of the
Company and no associate or affiliate of any of the foregoing persons has any
substantial interest, direct or indirect, by way of beneficial ownership of
securities or otherwise, in any matter to be acted upon at the meeting other
than the election of the directors.
Interest of certain persons in material transactions
None of the insiders of the Company, no nominee for election as a director of
the Company and no associate or affiliate of such persons or companies has any
material interest, direct or indirect, in any transaction since the
commencement of the Company's last completed financial year or in any proposed
transaction, which, in either case, has materially affected or will materially
affect the Company or any of its subsidiaries.
Directors' and officers' insurance and indemnification
TELUS has entered into agreements to indemnify its directors for liabilities
incurred while performing their duties, to the extent permitted by law. The
Company also maintains insurance, which protects directors and officers of the
Company against claims made, provided they acted in good faith on behalf of
TELUS, and subject to policy restrictions. Such insurance currently provides
for an annual aggregate limit of $135 million USD coverage with a $2.5 million
USD deductible; where the Company is not able to indemnify the insured persons
the deductible is nil. The approximate premium associated with the insurance
protection of individual directors and officers was $1,300,000 for 2006.
Additional matters and information
Additional financial information is contained in the Company's Annual
Information Form and the audited consolidated financial statements of the
Company for the year ended December 31, 2006 and Management's discussion and
analysis thereon. Copies of these documents are available upon request to
TELUS' Corporate Secretary at 21st Floor, 3777 Kingsway, Burnaby, British
Columbia, V5H 3Z7. All of the Company's public documents are filed with SEDAR
and EDGAR and may be found on the following websites, sedar.com and sec.gov.
Board approval
The Board of Directors has approved in substance the content of this
information circular and the sending of this information circular to the
holders of common shares and non-voting shares.
DATED March 9, 2007.
s/s Audrey T. Ho
____________________
Audrey T. Ho
Vice-President, Legal Services and General Counsel
and Corporate Secretary
Appendix A: Statement of TELUS' corporate governance practices
TELUS is committed to effective and best practices in corporate governance. In
2006, TELUS maintained its focus on good corporate governance and continued to
seek out opportunities for improvement, while regulators continued to take
measures that will impact TELUS, including:
* the announcement by the Canadian Securities Administrators (the "CSA") in
March 2006 that it would not proceed with Multilateral Instrument 52-111
Reporting on Internal Control over Financial Reporting;
* the announcement by the CSA in March 2006 of proposed revisions to
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings to include additional provisions with respect to
internal control over financial reporting;
* the announcement by British Columbia's Attorney-General in February 2006
that it would defer bringing the amended British Columbia Securities Act
into force and the subsequent request for comments in June 2006 regarding
the type of secondary market civil liability regime British Columbia should
adopt;
* the release in June 2006 by the Ontario Securities Commission of proposed
Policy 51-604 Defence for Misrepresentations in Forward-Looking
Information; and
* the amendments to National Instrument 51-102 Continuous Disclosure
Obligations which came into force in December 2006.
TELUS is in full compliance with Policy 58-201 Corporate Governance Guidelines
("Governance Guidelines"), National Instrument 58-101 Disclosure of Corporate
Governance Practices ("Governance Disclosure Rule") and the Investor Confidence
Rules issued by the CSA. TELUS is also in full compliance with section 303A of
the New York Stock Exchange Governance Standards (the "NYSE Governance Rules")
including certain elements that are not legally required of TELUS.
TELUS is committed to transparent and comprehensive disclosure of its corporate
governance practices. For over a decade, the Company has disclosed its
corporate governance practices, first in relation to the TSX governance
guidelines adopted by the TSX in 1995, and now as required by the Governance
Disclosure Rule, which was adopted by the TSX in 2005. In December 2006, the
Canadian Institute of Chartered Accountants recognized TELUS for the second
year in a row for excellence in corporate governance and reporting by
presenting to the Company the Award of Excellence for Best Corporate Governance
Disclosure across all industry sectors in Canada.
Consistent with TELUS' commitment to fulsome disclosure, TELUS regularly
assesses emerging best practices and has provided voluntary additional
disclosure on its corporate governance practices that often exceeds legal
requirements. For 2006, that assessment included an evaluation of the new
executive compensation disclosure rules adopted by the SEC in August 2006, and,
to the extent not inconsistent with Canadian rules, adopting elements of the
new rules even though they are not binding on TELUS. The disclosure contained
below follows the Governance Disclosure Rule but includes voluntary disclosure
not mandated by it.
Disclosure of TELUS' practices
Board of Directors
Independent directors
Since 2000, the TELUS Board of Directors has adopted a policy requiring
that at least a majority of its Board of Directors be "independent." In
determining "independence," the Board of Directors has adopted a set of
criteria that goes beyond applicable securities rules. The Board has chosen
to voluntarily comply with all elements of the "independence" test
pronounced by the New York Stock Exchange including those that are not
binding on TELUS. Accordingly, the "independence" tests applied by TELUS
comply with the Governance Disclosure Rule, the CSA's Investor Confidence
Rules and the NYSE Governance Rules. These policies are reflected in the
TELUS Board Policy Manual.
The Board applied this expanded test of independence to the relationship
between each director and the Company based on information updated annually
through a comprehensive questionnaire.
As one of Canada's largest telecommunications companies and the incumbent
local exchange carrier in several provinces, the Company provides service
to its directors and their family members, and to many organizations with
whom the directors are associated. The Board has determined that the
provision of services per se does not create a material relationship
between the director and the Company. Rather, the Board examines a variety
of factors including the magnitude of the service provided, the monetary
and strategic value of those services to each party, the degree of
dependence on such relationship by either party, and how easily a service
may be replaced, in determining if any such relationship creates a material
relationship. The Board considers similar factors in assessing the
materiality of any relationship between the Company and any supplier or
lender with whom a director is associated.
Applying the above tests and process, the Board is satisfied that, except
for Darren Entwistle, there is no material relationship existing between
any of the proposed directors and the Company, either directly or as a
partner, shareholder or officer of an organization that has a material
relationship with the Company. The Board has therefore determined that all
of the proposed directors, other than Mr. Entwistle, are independent.
Additional disclosure on Board members, including their business experience
and backgrounds, and the names of other reporting issuers or organizations
on whose boards they serve, can be found in the Election of directors on
page 6 of this information circular, the TELUS 2006 annual report -
business review, and at telus.com/bios.
Non-independent directors
Mr. Entwistle, as President and CEO of TELUS, is the only director who is a
member of management of the Company and the only director who is not an
"independent" director pursuant to the Governance Disclosure Rules.
Interlocking boards
Brian MacNeill and Darren Entwistle both sit on the Board of the TD Bank
Financial Group.
Meetings of independent directors
As a regular feature at regularly scheduled Board meetings, the Board meets
without management other than the CEO and the Corporate Secretary, followed
by an "in-camera" session without the CEO or any other member of management
present. The Chair presides over these in-camera sessions of the Board.
Pursuant to the TELUS Board Policy Manual, the Board is also required to
hold at least one annual in-camera session without non-independent
directors present. In 2006, the Board held eight such in-camera sessions.
Attendance records for each director can be found on page 10. Directors are
expected to attend all Board and committee meetings.
Independent Chair of the Board
The Board has adopted a number of policies to better ensure the
independence of the Board. The Chair of the Board is required to be
independent. In addition, the positions of Chair and CEO must be separate.
Brian Canfield, the current Chair of the Board, was CEO of BC TELECOM Inc.,
predecessor to TELUS, from October 1990 to July 1997. He also served as
President and CEO of the Company for a brief period from September 1999 to
July 10, 2000 while the Company searched for a new CEO. Mr. Canfield has
passed the three year "cooling-off period" required by the Governance
Disclosure Rule and the NYSE Governance Rules for establishing his
"independence" from management. The Board has determined that Mr. Canfield
is an "independent" director under the Governance Disclosure Rule and the
NYSE Governance Rules.
Board mandate
The TELUS Board Policy Manual provides guidelines to the Board and was
developed to assist Board members in fulfilling their obligations, both
individually and collectively, and to make very explicit the expectations
on the Board, Board committees, individual directors, the Chair, the
Committee Chairs, and the CEO. The terms of reference for the Board of
Directors are contained in the Manual and also attached as Appendix "B" to
this information circular. A copy of the TELUS Board Policy Manual in its
entirety is available at telus.com/governance.
To help the Board fulfill its duties and responsibilities, the Board
delegates certain powers, duties and responsibilities to committees to
ensure full review of certain matters. The terms of references of the
committees set out the mandates, duties and authority of the committees,
and the scope of their authority. In addition, each committee uses an
annual work plan to guide its deliberations during the course of the year.
The committees report to the Board on their activities on a regular basis.
To further delineate the responsibilities of the Board, the Board has
adopted a Delegations Policy under which the Board delegates certain
decisions to management. This policy provides guidance to the Board and
management on matters requiring Board approval including major capital
expenditures, acquisitions, investments or divestitures.
The Board has also approved a Policy on Corporate Disclosure and
Confidentiality of Information, a copy of which is available at
telus.com/governance. The policy is reviewed annually with the assistance
of the Chief Internal Auditor for continuous improvements. The policy sets
out the Company's policies and practices on corporate disclosure and
applies to all TELUS team members, including directors, officers and
employees. The policy's objectives include i) disclosing information in a
timely, consistent and appropriate manner; and ii) disseminating material
information pursuant to all applicable legal requirements. Material changes
to the policy, as approved by the Disclosure Committee, must be reported to
the Audit Committee and approved by the Board.
Position descriptions
The Board has developed a description of the role and responsibilities the
Chair of the Board, and brief position descriptions for the Chair of each
Board committee, all of which are described in the TELUS Board Policy
Manual. The duties of the Chair include leading the Board in its management
and supervision of the business and affairs of the Company, its oversight
of management and promoting effective relations with shareholders.
The Board has also developed terms of reference for the CEO, which are
described in the TELUS Board Policy Manual. The Board annually approves the
Company's goals and objectives for which the CEO is responsible for
meeting. As well, his annual performance objectives relevant to
compensation, which are reviewed and approved by the Compensation
Committee, supplement his mandate. With input from the remaining directors
as part of the process, the Compensation Committee evaluates the
performance of the CEO against his annual objectives and reports its
conclusions back to the Board. For further details, see Mandate and Report
of the Human Resources and Compensation Committee on page 21.
Orientation and continuing education
The Corporate Governance Committee reviews, approves and reports to the
Board on the directors' orientation program and plans for the ongoing
development of existing Board members. Directors and management identify
topics for continuing education through discussions at Board and committee
meetings, annual evaluations and skills self-assessment surveys.
The Board's continuing education program evolved in 2006 by the addition of
two innovations at Board meetings: first, discussions on technology,
industry or specific business strategy led by different TELUS executive
leadership team members were added as a recurring feature; second, a new
"Ask the CEO" in-camera discussion with the CEO was introduced at every
regular board meeting, structured to allow the CEO and the Board to engage
in interactive discussions on key business strategy, operations and risks
in addition to the regularly scheduled CEO in-camera session. In addition,
educational topics are regularly presented at either meetings of the Board
or the committees for review and discussion, relevant literatures are
circulated, and the directors are canvassed each year for topics of
interest. In 2006, the Board engaged in education sessions on: developments
in the telecommunications industry, including the major players and impact
on the Company; the impact of emerging technologies on the communications
industry and TELUS; emerging best practices in corporate governance,
including a review of US and Canadian practices on majority voting and
mandatory retirement; updates on corporate governance regulations and
privacy law; emerging issues in pension governance; and emerging best
practices and changing regulations regarding executive compensation.
Finally, in accordance with TELUS policy to fund director education, the
Chair approved Company funding for a director's participation in the
Directors Education Program at the Institute of Corporate Directors.
Ethical business conduct
TELUS has adopted an Ethics Policy, which applies to all TELUS team
members, including directors, officers and employees of TELUS. Copies of
the Ethics Policy are available at telus.com/governance. As part of the
policy, TELUS created the TELUS EthicsLine, which provides the public and
TELUS team members with a channel for anonymous and confidential questions
or complaints on accounting, internal controls or ethical issues that are
reported on a quarterly basis to the Audit Committee.
TELUS has also established an Ethics Office, which conducts investigations,
provides advice on ethical dilemmas and establishes appropriate policies
and guidelines on TELUS' expected standards of business conduct. The Ethics
Office oversees ethics training, including an online interactive ethics
course that is mandatory for all TELUS team members, and annually requires
each director to review the Ethics Policy and affirm that he or she has
done so.
The Audit Committee of the Board is required to review the Ethics Policy on
an annual basis and recommend changes for approval to the Board as
appropriate. The Audit Committee also receives quarterly reports from the
Chief Internal Auditor on the results of any investigation of
whistleblower, ethics and internal controls complaints. Waivers granted
under the Policy must be pre-approved by the Board of Directors or their
designate.
The Ethics Policy also provides guidelines on how to deal with conflicts of
interest and requires disclosure of actual or potential conflicts by TELUS
team members. Furthermore, under the Business Corporations Act (British
Columbia) and the Company's Articles, any director or executive officer who
holds any office or possesses any property, right or interest that could
result in the creation of a duty or interest that materially conflicts with
the individual's duty or interest as a director or executive officer of the
Company, must promptly disclose the nature and extent of that conflict. A
director who holds a disclosable interest in a transaction or contract into
which the Company has entered or proposes to enter may not vote on any
directors' resolution to approve that contract or transaction.
Nomination of directors
Upon the recommendation of the Corporate Governance Committee, the Board
annually reviews the size and composition of the Board and the committees,
and proposes nominees for election as directors, in accordance with the
TELUS Board Policy Manual, to advance the objective of forming an
effective-functioning Board that presents a diversity of views and business
experience.
The Corporate Governance Committee, which is comprised entirely of
"independent" directors, is also responsible for assessing and making
recommendations regarding Board effectiveness and establishing a process
for identifying, recruiting, nominating and appointing new directors. This
process has been outlined in the TELUS Board Policy Manual. Furthermore,
during the evaluation process, the Chair of the Board aims to identify for
the Corporate Governance Committee impending vacancies on the TELUS Board
as far in advance as possible to allow sufficient time for identification
and recruitment of new directors.
When recruiting new directors, the Corporate Governance committee
considers, among other things, the strategic imperatives for the Company,
the skills and competencies of the current directors, the existence of any
gaps in Board skills as a whole and the attributes and experience new
directors should have in order to best enhance the Company's business plan
and strategies. Key components of this review are the Board and director
evaluations and skills self-assessments and the committee's consultations
with the Chair of the Board and the CEO. The Corporate Governance Committee
formulates a list of the most desirable mix of attributes and experience,
including track record of business success and relevant industry
experience, and may retain an external search firm to assist in the
identification of candidates meeting the requisite criteria. Prospective
candidates meet with the Chair and the President and CEO and any other
directors the Corporate Governance Committee deems appropriate, and are
informed of meeting schedules and the commitment the Company expects of its
directors. The Corporate Governance Committee also assesses the financial
literacy and independence of prospective candidates prior to making its
recommendation to the Board.
The terms of reference for the Corporate Governance Committee are set out
at telus.com/governance. For a summary of the responsibilities, powers and
operation of the Corporate Governance Committee see Mandate and report of
the Corporate Governance Committee on page 14.
Compensation
Officers' compensation
The Board has delegated to the Compensation Committee, which is comprised
entirely of "independent" directors, the responsibility for reviewing and
recommending to the Board compensation of the CEO, and approving the
compensation of the remaining executive management.
The Compensation Committee is a proponent of pay-for-performance by linking
executive compensation directly to the achievement of business objectives
and has adopted a market-based approach to executive compensation to ensure
that the Company provides competitive compensation.
In addition to setting executive compensation, the Compensation Committee
reviews the Company's overall organizational structure for executive
management, and recommends to the Board for approval the appointment of
executive leadership team members. The Compensation Committee reviews and
recommends to the Board for approval annually the CEO's succession plan. In
addition, the Compensation Committee reviews, approves and reports to the
Board on an annual basis, or more frequently as required, succession plans
for the remaining executive management including specific personal
development plans and career planning for potential successors. For more
information on the Compensation Committee's responsibilities, including the
process by which it determines compensation of TELUS' executive leadership
team, see the Mandate and report of the Human Resources and Compensation
Committee on page 21.
Compensation consultant
The Compensation Committee engages the services of an external compensation
consultant, Hewitt Associates, to assist the Committee in its review of
executive compensation practices, executive compensation design, market
trends and regulatory considerations. For further information regarding the
compensation consultant, including its mandate, see the Mandate and report
of the Human Resources and Compensation Committee on page 21.
Directors' compensation
The Corporate Governance Committee reviews and recommends to the Board the
compensation and benefits of Board members. In this regard, the Committee
considers factors such as market data, time commitments, and
responsibilities of the directors. In 2003, TELUS stopped granting options
to directors. In 2005, the Corporate Governance Committee discussed the
Company's philosophy on directors' compensation, determining to conduct a
fulsome review of directors' compensation in 2006. The Corporate Governance
Committee conducted the comprehensive review in 2006, with the assistance
of Hewitt Associates, employing a market study of compensation arrangements
of a peer group of public companies in similar industries and public
companies of comparable size and complexity in different industries. For
details on the review and the 2006 and 2007 compensation payable to
directors, see Director compensation on page 10.
The Company aligns the Board's interests with the interests of shareholders
by maintaining equity ownership thresholds to be attained by directors, and
by choosing equity payment in the form of deferred share units in lieu of
options. In February 2006, the Corporate Governance Committee recommended
for approval to the Board an increase in the Chair's equity ownership
threshold from $400,000 to $500,000, to be acquired within five years of
joining the Board. For all other non-management directors, the minimum
equity ownership was also increased from $200,000 to $300,000 to be
acquired within five years of joining the Board. In addition, the Company
requires that half of the annual board retainer be directed to the purchase
of TELUS shares or paid in the form of deferred share units, until the
target equity ownership threshold is reached. As of March 9, 2007, all of
the proposed non-management directors (including the Chair) have exceeded
their minimum equity ownership levels. All non-management directors'
shareholdings are disclosed under the Election of directors on page 6.
Other Board committees
In addition to the Audit, Corporate Governance and Human Resources and
Compensation Committees, the Board has established a Pension Committee. The
Pension Committee is responsible for overseeing most of the pension plans
pertaining to the Company and its subsidiaries. Its specific duties include
responsibility in respect of the actuarial soundness of the Pension Plans
(as defined in the Pension Committee's terms of reference), the
administrative aspects of the Pension Plans, investment policy, the
performance of the investment portfolios and compliance with government
legislation.
All committees have the authority to retain external advisors at TELUS'
expense in connection with their responsibilities, and both the Corporate
Governance Committee and Compensation Committee have done so in 2006 as
described in their reports. Detailed descriptions of each committee's
mandate are found in this information circular on pages 14, 16, 18 and 21,
while the full text of each committee's terms of reference can be found at
telus.com/governance.
Assessments
The Corporate Governance Committee, in conjunction with the Chair, carries
out an annual assessment of the Board and its members that is comprised of
three components: a Board effectiveness survey, a peer evaluation and a
skills self-assessment. In the first, directors are asked to rate the
effectiveness of the Board, each committee, the Chair of the Board and
committee chairs. The survey also asks directors to rate Board and
committee processes and the Board's relationship with management and
provide suggestions for improvement in any and all areas surveyed. The
director peer evaluation survey, initiated in 2002, provides each director
with feedback from his or her peers on his or her performance. It also
provides directors with suggestions for improving their effectiveness as
directors and contributions to the Board. Finally, the directors complete
an annual skills self-assessment, designed to assist in determining the
strengths and gaps in Board skills as a whole and to enable a comprehensive
and meaningful assessment of skill requirements for nominating future
directors and succession planning. This self-assessment also assists the
Corporate Governance Committee in determining topics for continuing
education and assessment of each director's financial literacy.
The Board effectiveness assessment and peer evaluation are conducted
confidentially and, in accordance with the TELUS Board Policy Manual, the
Chair conducts separate interviews with each director to discuss the
results of the director's evaluations and self-assessment. These interviews
provide an opportunity for frank and constructive discussion of any and all
issues, with a view to enhancing the personal contributions of each
individual. The Chair reports the collated results of the interviews and
the three assessments to the Board. Similarly, the Chair of the Corporate
Governance Committee reviews the assessments of the Chair of the Board,
discusses them with the Chair and reports the collated results to the
Board.
Appendix B: Terms of reference of the Board of Directors
1. INTRODUCTION
The Board is responsible for the stewardship of the Company and overseeing
the management of the Company's business and affairs. The Board may
discharge its responsibilities by delegating certain duties to committees
of the Board and to management. The specific duties delegated to each
committee of the Board are outlined in the terms of reference for those
committees.
2. NO DELEGATION
2.1 The Board may not delegate the following matters to any committee:
a) any submission to the shareholders of a question or matter
requiring the approval of the shareholders;
b) the filling of a vacancy on the Board or any Board committee;
c) the allotment and issuance of securities;
d) the declaration and payment of dividends;
e) the purchase, redemption or any other form of acquisition of shares
issued by the Company;
f) the payment of a commission to any person in consideration of the
purchase or agreement to purchase shares of the Company from the
Company or from any other person, or procuring or agreeing to
procure purchasers for any such shares;
g) the approval of management proxy circulars;
h) the approval of any takeover bid circular or directors' circular;
i) the approval of the financial statements and management's
discussion and analysis of the Company;
j) the appointment or removal of the CEO;
k) the power of the directors set forth in the Company's charter
documents with respect to ownership and voting restrictions;
l) the establishment of any Board committee and its mandate;
m) the adoption, amendment or repeal of the charter documents of the
Company; and
n) any other matter which is required under applicable corporate or
securities laws to be decided by the Board as a whole.
3. BOARD OF DIRECTORS
3.1 Composition
a) The number of directors to be elected at a meeting of the
shareholders will be a minimum of 10 and a maximum of 16 directors,
including the Chair, a majority of whom are Independent Directors.
b) Subject to election by the shareholders and the requirements of the
applicable laws, the Company's charter documents and the rules of
any stock exchanges on which the shares of the Company are listed,
the CEO will be a member of the Board. Upon ceasing to be CEO, he or
she will be expected to volunteer to resign from the Board and, in
any event, will not be eligible for re-election to the Board upon
ceasing to be CEO.
c) The CEO will be the only management director on the Board,
provided, however, that the directors may fill a casual vacancy on
the Board with another member of management, to hold such position
until the next annual general meeting of the Company.
d) The Chair of the Board must be an Independent Director.
3.2 Meetings
a) The Board will meet at least once each quarter and, including such
quarterly meetings, a minimum of six times a year. Some of the
Board's meetings should be held in locations other than Vancouver.
b) The Chair and CEO, with the assistance of the Corporate Secretary,
will be responsible for the agenda for each Board meeting.
c) The Board encourages management to attend Board meetings, where
appropriate, to provide additional insight to matters being
considered by the Board.
d) The Board should have an in-camera session without management
present, including any management directors, as a regular feature
of each regularly scheduled Board meeting.
e) Once a year at a regularly scheduled Board meeting, the Board
should hold an in-camera session without non-Independent directors
in attendance.
f) The quorum necessary for the transaction of business of the
directors will be a majority of the directors.
g) To the extent possible, Board materials will be made available
in electronic format.
3.3 Election or Appointment of Directors
The Board, following recommendation by the Corporate Governance Committee,
will:
a) approve the management slate of nominees proposed for election at
annual general meetings of the Company;
b) approve candidates to fill any casual vacancy occurring on the
Board; and
c) fix the number of directors as permitted by the Company's charter
documents.
3.4 Compensation and Share Ownership Requirement
Appendix I - Director Compensation and Share Ownership Criteria lists the
current levels of directors' compensation and the shareholdings required of
directors of the Company.
3.5 Committees of the Board
The Board will have the following committees and, after considering the
recommendation of the Corporate Governance Committee, approve and/or modify
their terms of reference:
a) Audit Committee - Appendix E
b) Corporate Governance Committee - Appendix F
c) Human Resources and Compensation Committee - Appendix G
d) Pension Committee - Appendix H
The Board may establish a new standing or ad hoc committee, after considering
the recommendation of the Corporate Governance Committee. Not less than a
majority of the members of any new standing or ad hoc committee will be
Independent Directors.
Each committee will report to the Board on its meetings and each member of the
Board will have access to minutes of committee meetings, regardless of whether
the director is a member of such committee. See Appendix D - Terms of
Reference for Committees of the Board of Directors.
4. SELECTION OF MANAGEMENT
4.1. In accordance with the Company's charter documents, the Board will
appoint and replace the CEO of the Company and, after considering the
recommendation of the Human Resources and Compensation Committee,
approve the CEO's compensation.
4.2. Upon considering the advice of the CEO and the recommendation of the
Human Resources and Compensation Committee, the Board will approve the
appointment of all members of the Executive Leadership Team.
4.3. The Board is responsible for satisfying itself as to the integrity of
the CEO and other senior management of the Company.
4.4. The Board is responsible for overseeing succession planning.
5. STRATEGY DETERMINATION
The Board will:
5.1. annually consider and approve the Company's objectives and goals, its
strategic plan to achieve those objectives and goals and approve any
material changes thereto;
5.2. monitor and assess the resources required to implement the Company's
strategic plan;
5.3. monitor and assess developments which may affect the Company's
strategic plan;
5.4. evaluate and, as required, enhance the effectiveness of the strategic
planning process; and
5.5. monitor and, as required, enhance the execution of the strategic plan
by management and monitor corporate performance against the Company's
objectives and goals.
6. MATERIAL TRANSACTIONS
6.1 Subject to delegation by the Board to management and to committees of
the Board, the Board will review and approve all material transactions
and investments.
7. PUBLIC REPORTING
The Board is responsible for:
7.1 ensuring that the financial performance of the Company is adequately
reported to shareholders, other security holders and regulators on a
timely and regular basis;
7.2 ensuring that the financial results are reported fairly and in
accordance with generally accepted accounting standards and related
legal disclosure requirements;
7.3 ensuring that appropriate policies and procedures are in place to
ensure the timely disclosure of any other developments that have a
significant and material impact on the Company;
7.4 reporting annually to shareholders on its stewardship for the preceding
year; and
7.5 providing for measures that accommodate feedback from shareholders.
8. MONITORING RISKS AND INTERNAL CONTROLS
The Board is responsible for:
8.1 identifying the principal risks of the Company's business and ensuring
the implementation of appropriate systems to manage these risks; and
8.2 ensuring the integrity of the Company's internal control and management
information systems.
9. PROCEDURES AND POLICIES
The Board will monitor compliance with all significant policies and procedures
by which the Company is operated.
10. LEGAL REQUIREMENTS
10.1 The Board will monitor and ensure compliance with all applicable laws
and regulations.
10.2 The Board will strive to ensure that all corporate documents and
records have been properly prepared, approved and maintained.
11. EVALUATION
The Board will evaluate annually the effectiveness of the Board as a whole,
individual directors, committees and the Chair. See Appendix L - Board and
Director Evaluation Process.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: April 4, 2007
TELUS Corporation
/s/ Audrey Ho
_____________________________
Name: Audrey Ho
Title: Vice President, Legal Services and
General Counsel and Corporate Secretary