Barrick execs’ pay increase under fire
Pension funds will vote against re-electing mining firm’s board
Three of the world’s largest pension funds say they won’t support the re-election of Barrick Gold Corp.’s board of directors or its executive compensation plan that includes a pay hike of 35 per cent for the board chairman.
The Ontario Teachers’ Pension Plan (OTPP), British Columbia Investment Management Corporation and the Netherlands’ PGGM Vermogensbeheer B.V., which is one of Europe’s biggest pension funds, said Friday they will oppose the Toronto gold miner’s pay scheme, which awards $12.9 million (U.S.) ahead of the board’s annual meeting April 28.
The pension funds join two major proxy advisers who recently recommended shareholders vote against a boost in executive compensation after a year in which Barrick reported a net loss of $2.9 billion and lost a third of its market value.
“We continue to have concerns over the composition of the board, specifically the lack of operational mining expertise,” OTTP said in an email. “Coupled with our ongoing concerns with the compensation decisions taken by the board, we have now lost confidence in the ability of the directors to effectively exercise their duties to our level of satisfaction.”
The gold-mining giant overhauled its compensation system after investor outrage over Thornton’s $11.9-million signing bonus in 2013, when the former Goldman Sachs president was hired to cochair the board with company founder Peter Munk as he was groomed to be Munk’s eventual successor.
“We continue to have concerns over the composition of the board, specifically the lack of operational mining expertise.” ONTARIO TEACHERS’ PENSION PLAN
A Barrick spokesperson defended the bullion behemoth’s decision to hike executive pay and dismissed accusations of the board’s lack of industry expertise, saying five of 13 board members have “deep mining knowledge.”
“Instead of awarding managers based on short-term performance, we’re measuring our leaders against a long-term scorecard designed to drive superior returns for the company’s owners under wide-ranging market conditions,” said Andy Lloyd.
“We’re also rewarding performance with common shares that must be held until retirement from the company. The result is that our leaders’ personal wealth is tied to the longterm success of the business, such that they are 100-per-cent incentivized to build long-term value for fellow owners,” he said.
The miner released a detailed response last week to concerns raised by Institutional Shareholder Services and Glass Lewis & Co. over Thornton’s “exorbitant” pay package, saying, “The chairman’s compensation is appropriate given his extraordinary contributions to rebuilding long-term value for shareholders.
“Barrick’s new leadership has designed a compensation system that restores the culture that drove the company’s initial success . . . (It) is unprecedented and is the most longterm, owner-centric system in the mining industry and well beyond. It has received considerable support,” said the corporate filing.
Barrick shares have plummeted 21 per cent over the last year, which saw Thornton fully taking the reigns as chairman from Munk last April.
The board has added six new independent directors and was forced to revamp its controversial remuneration practices after coming under fire in 2013 for large corporate pay packages and suggestions the board was too tightly controlled by the 86-year-old company founder.
Lloyd pointed out that new additions Brett Harvey and Ernie Thrasher are both technical mining people, and director Ned Goodman “is one of the most knowledgeable mining financiers in the world.”
Bill Birchall, the vice-chairman, has been involved in mining for over 30 years and Steven Shapiro comes from the oil and gas sector, he noted.
A new executive compensation program created last April to more closely align Barrick’s executive pay with performance got 80-per-cent shareholder approval from stockholders last year. But the teachers’ pension plan said it remains “troubled” by the structure of the executive compensation program, “and what we view as a misalignment between senior executive compensation and company performance.”
The fund said after carefully analyzing the miner’s corporate filings that it estimates annual incentive awards equated to about 135 per cent of salary for company co-presidents Kelvin Dushnisky and Jim Gowans, and long-term incentives equated to 150 per cent of their salary.
“In our view, these levels of compensation do not align with the assessed performance,” said the pension fund’s statement.
While the teachers’ fund said it supports the efforts for board renewal, “we do not believe that sufficient progress has been made in crafting a board with the appropriate set of skills we assess that Barrick needs.”
According to data compiled by Bloomberg, OTTP owns 0.06 per cent of Barrick. Together with the B.C. pension fund, the two own less than 1 percent of the company, Lloyd noted.