Analysis: Xstrata investors get pay vote but may not risk stand

Tue Oct 16, 2012 10:23am EDT
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By Sinead Cruise and Dasha Afanasieva

LONDON (Reuters) - Careful what you wish for.

That could be advice for corporate governance advocates who sought a separate vote on the lavish executive pay deal that was bundled in as part of the terms of the $33 billion merger between Glencore and Xstrata.

Thanks to a voting structure shake-up, shareholders will now be able to vote for the deal without the pay, and have an option to reject the proposed retention packages, achieving what looks like a victory against excessive boardroom remuneration.

But as unpopular as the retention packages are, fund managers may prove too worried about threatening the commercial promise of the union - and going against the advice of Xstrata's board - to risk making a stand.

That means at the end of the day, Glencore and Xstrata executives are likely to get both their merger and their pay, while silencing critics who had initially accused them of ramming the deal through without a separate pay vote.

One former Xstrata shareholder, who sold out of his position soon after the Glencore merger talks began, described the awkward dilemma facing shareholders as "appalling".

"There's nothing wrong with paying executives well if the shareholders are doing well too. But the whole obfuscation that is going on here and across the industry on pay, we are very much against," the fund manager said, asking not to be identified while discussing an investment decision on a deal that is still up in the air.

"The idea that you can be paid a lot before investors have made any money is ridiculous. Retention packages? Why have any of that? Why shouldn't we just pay people well after they have performed?"   Continued...

A logo of the Swiss mining company Xstrata is shown at the headquarters in Zug September 7, 2012. REUTERS/Michael Buholzer