North America's biggest proxy-advisory firm has told investors
at Barrick Gold Corp. to vote against chairman John Thornton's $13
million 2014 pay package, adding to growing investor disquiet over
governance practices at the world's largest gold miner.
Institutional Shareholder Services said that the former Goldman
Sachs president's 36% pay rise was unwarranted given Barrick's
share price underperformed its peers. Last year, Barrick's share
price lost over a third of its value. In recent years, Barrick has
been dogged by investors" concerns that the company was paying Mr.
Thornton too much.
Mr. Thornton was paid $5 million in cash and was given $7
million to buy Barrick shares for the year ended Dec. 31, 2014,
according to the company's annual management circular. A further
$913,547 was awarded to Mr. Thornton in pension and other
benefits.
"At a time when shareholder returns have significantly lagged
peer companies, that total compensation for Thornton .. has
nevertheless increased significantly in the most recent year is
seen to be problematic at a minimum and seemingly unwarranted," ISS
said in a report viewed by the Wall Street Journal.
As North America's biggest proxy-advisory firm, Institutional
Shareholder Services, is considered by many the most influential
with institutional investors that rely on these services for voting
recommendations.
Glass Lewis & Co., another prominent proxy advisory firm,
also recommended investors vote against the company's executive
compensation, arguing it is "excessive" and highlights a
"disconnect" between pay and performance.
"In general we find Mr. Thornton's compensation structure, and
the disclosure of that structure, highly irregular and concerning,
particularly when compared to executives compensated at a similar
level, " Glass Lewis said.
Many investors are already frustrated by the pay package of Mr.
Thornton and other gold miners.
"Gold company shareholders are suffering double-digit losses and
falling dividends," said Joe Foster, a fund manager at Van Eck
Associates Corp., which is one of Barrick's largest shareholders.
"I don't see how any gold mining executive can justify an increase
in compensation in the midst of a historic bear market."
But Mr. Thornton has been singled out by many investors, given a
history of what they see as high payments at a time of corporate
underperformance.
"Compensation should be commensurate with performance," said
Robert Gill, a Barrick investor at Lincluden Investment Management.
Barrick is "paying a lofty compensation package irrespective of
performance," he said in an email.
Mr. Thornton's pay is larger than that of his peers. Last year,
Newmont Mining Corp., the world's second largest gold miner
measured by production, paid its non-executive chairman, Vincent A.
Calarco, $572,000, according to the company's proxy form.
A Barrick spokesman said that Mr. Thornton, unlike many other
gold mining chairmen, is an executive chairman. This role typically
wields more influence over company operations.
Mr. Thornton was also paid more than Barrick's joint chief
executive officers, Jim Gowans and Kelvin Dushnisky, who were
awarded $7.3 million and $4.5 million, respectively, in cash and
shares.
The Toronto miner said last year that it would compensate senior
staff based on a publicly available scorecard that measures
shareholder returns and dividends, among other metrics, and that it
would pay a significant portion of compensation in shares that can
only be sold when those employees leave the company.
A spokesman for Barrick said that one of Mr. Thornton's metrics
was in leading and implementing a "transformational strategy."
"Mr. Thornton's performance metric was not short-term share
price moves, it was to make transformational reforms," he said. The
spokesman said that just over half of the pay was in shares that
cannot be vested till Mr. Thornton retires and that the chairman
has also bought some 700,000 shares with his own money.
In recent months, Barrick has cut head office staff and talked
of becoming more entrepreneurial by making decisions closer to the
actual mines.
Seymour Schulich, a former mining executive who is among
Barrick's largest investors, believes that Mr. Thornton has made
those changes and that they are positive for the company. But like
many other investors, he is still surprised at the rise in Mr.
Thornton's pay.
"To raise a salary in a year like that, I don't agree with," he
said.
Write to Alistair MacDonald at alistair.macdonald@wsj.com and
Ben Dummett at ben.dummett@wsj.com
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