Although the vote on executive pay is non-binding, it does send a message to the board. Companies often take shareholder concerns into account.
RACHELLE YOUNGLAI - MINING REPORTER
The Globe and Mail
Published Thursday, Apr. 09 2015, 1:11 PM EDT
An influential proxy adviser urged shareholders to oppose Barrick Gold Corp.'s compensation plans, saying it has concerns about chairman John Thornton's "exorbitant" pay package.
Barrick increased Mr. Thornton's compensation 36 per cent to $12.9-million (U.S.) for last year, citing his plans to improve the miner's performance by slashing debt and focusing on its gold assets in the Americas.
"It comes as a considerable surprise that the company has once again decided to reward Mr. Thornton with such a generous pay package," Glass Lewis & Co. said in a note released ahead of the miner's annual meeting April 28. "We … consider the ongoing compensation arrangement with its chairman to be excessive and extremely risky, particularly given the company's track record of exorbitant pay packages for Mr. Thornton," Glass Lewis said.
A key Barrick shareholder agreed Mr. Thornton's compensation was inappropriate.
"I don't know why he couldn't freeze his salary," said Seymour Schulich, a prominent Canadian businessman who owns 15-million shares of Barrick.
"Do I think there was a lack of sensitivity there? Yes. Do I think you go and kill people because of it? No. Out of 12 things I think (Mr. Thornton) has done, 11 things are right," he said.
Mr. Schulich, who made his fortune in mining, said the Barrick board should have been sensitive to the fact that Barrick did not have a good year, even if that was due to weak gold prices and fallout from decisions made before Mr. Thornton's time.
Glass Lewis acknowledged the chairman's accomplishments, such as Barrick's narrower loss last year, but said, "We nonetheless question whether such significant compensation during a year of poor returns for shareholders is warranted."
Stock of the world's biggest gold producer is down about 17 per cent since Mr. Thornton became chairman last April.
The negative recommendation comes a year after shareholders praised Barrick for overhauling its executive-compensation practices and shaking up its board.
Barrick's new compensation scheme, which was adopted after a group of investment-management firms two years ago opposed Mr. Thornton's $11.9-million signing bonus, evaluates its executives against a strict set of performance metrics, such as balance-sheet strength. But the method for determining Mr. Thornton's pay is subjective and at the discretion of the compensation committee. Glass Lewis called this a "black box."
A spokesman for Barrick said Mr. Thornton's performance is evaluated by independent directors against a series of concrete initiatives disclosed to shareholders in advance every year.
Many large shareholders such as managers of index funds are expected to follow Glass Lewis's advice.
Mr. Schulich said he had already voted in favour of Mr. Thornton, Barrick's directors and the compensation plans. He commended Mr. Thornton for getting rid of layers of management and for requiring executives, as well as himself, to buy and hold Barrick stock until they retire. Mr. Thornton used half of his latest compensation, plus his signing bonus and his own funds to buy 1.4-million shares of Barrick.
A spokesman for Barrick said the compensation committee recognized Mr. Thornton's "rapid progress in implementing" reforms that have put the miner "back on the path to delivering sustainable returns for our shareholders."
The spokesman added that in a turnaround situation such as this, the board of directors "believes it is appropriate to consider a range of performance factors that go beyond short-term share-price performance."
Although the vote on executive pay is non-binding, it does send a message to the board. Companies often take shareholder concerns into account.
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