Gold Fields pay rankles investors
But no objections to Holland keeping his job
SHAREHOLDERS voted overwhelmingly to reappoint embattled Gold Fields CEO Nick Holland at the group’s annual general meeting on Friday, despite venting their displeasure about the company’s executive pay policy.
Over the past two years, Holland has faced fierce criticism on his remuneration, Gold Fields underperforming its peers and the controversial South Deep empowerment deal, for which Gold Fields is under investigation by the US Securities and Exchange Commission (SEC) and the Hawks after bribery allegations. Despite the criticism, 99.9% of the shareholders voted for Holland’s reappointment as a Gold Fields director on Friday.
Paul Schmidt, the chief financial officer, received a 97.9% vote in favour of him retaining his position.
But shareholders did make their feelings clear about the salaries paid to the Gold Fields executives.
In all, 30.2% of shareholders voted against approving the remuneration policy, and only 69.8% voted in favour.
Although the vote was nonbinding, this is one of the most significant stands against the remuneration policy of a JSE company in recent times.
Holland’s pay was cut to R24.9million last year, from R45-million in 2012, which included share proceeds worth R13-million.
Schmidt’s pay was cut to R16.3million last year from R20-million in 2012, including share proceeds of R4million.
Mehluli Mncube, a representative of the Eskom pension fund, commended Holland for forfeiting his bonus for 2013, a decision that relates to the South Deep deal, but queried the bonuses paid to other managers in the light of Gold Fields’s poor performance.
“The company hasn’t performed very well. Revenue is down. Earnings are down. On all the key financial metrics, the numbers are down. If you look at the bonuses paid, you don’t get a sufficient link between the financial performance of the company and the bonuses paid to directors,” Mncube said.
Annual bonuses paid to Schmidt and 12 prescribed officers totalled R51-million. This includes a massive R13.1-million payment, including a sign-on bonus, for Ernesto Balarezo, who was appointed Gold Fields’s executive vice-president for South America in March last year. Bonuses in 2012 totalled R50.7-million.
Gold Fields reported a loss on continuing operations of R6.2-billion last year, compared with a profit of R2.9billion in 2012.
Its share price fell nearly 34% over the past year, underperforming those of locally listed rivals. While Harmony Gold lost 25% over the same period, AngloGold Ashanti gained 6% and Sibanye Gold nearly 216%. The JSE All Share index rose 21%.
Alan Hill, chairman of the remuneration committee, defended the bonuses, saying short-term incentives were linked to factors such as safety performance and production, which have a weight of 65%, and employee performance, which has a weighting of 35%.
Mncube said after the AGMthat he would ask the board to add financial metrics such as free cash flow, profitability and return on investment as performance measures, and give them a heavier weighting in the determination of bonuses.
He also queried Holland’s base pay, which increased 5% last year to R9.7million.
“His base pay is still very high, especially if you consider that they unbundled substantial assets to form Sibanye. Gold Fields is now a much simpler organisation, [but] his base pay is higher,” Mncube said.
Gold Fields’s Driefontein, Kloof and Beatrix mines, which contributed about 56% of profits in 2012, now form part of Sibanye, which was listed separately in February last year.
Gold Fields chairman Cheryl Carolus said at the meeting that the company’s lawyers were working to expedite the resolution of the US SEC investigation.
“We should not lose sight that the primary beneficiaries of the South Deep empowerment deal are our employees and communities, through the South Deep community and education trusts.”
In its annual form 20F filing to the SEC, Gold Fields said Invictus, the South Deep empowerment vehicle that benefits 73 individuals, including ANC chairwoman Baleka Mbete, received R54-million in aggregate from 2011 to the end of last year. Of this, about 40% reflected payments made in respect of interests held by individuals.
The South Deep Education Trust, administered by Invictus, has received R44.5-million since 2011, and donated R25.2-million during the period. The South Deep Community Trust, which is yet to disburse funds, was expected to make “significant progress” in 2014-15.