Wary investors slow to warm to Barrick Gold's latest shakeup

Mon Jul 21, 2014 11:00pm EDT
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By Euan Rocha

TORONTO (Reuters) - Worried they may be given the cold shoulder by an imperious leadership, shareholders of Barrick Gold Corp, the world's biggest gold miner, are taking a "show me" approach to the company's latest management shakeup.

Barrick said last week that Chief Executive Jamie Sokalsky will leave the company in September. He will be replaced by two co-presidents, a move that concentrates power in the hands of Executive Chairman John Thornton, a man handpicked for the job by Peter Munk, who founded the company and headed it his way for decades.

"The concern in this situation is that the person setting the strategy does not listen to the shareholders, who are the real owners of the company," said Chris Mancini, an analyst at Gabelli Gold Fund, which owns more than 2.4 million shares in Barrick according to Thomson Reuters data.

"There was a concern within the market that Mr. Munk was not listening to shareholders...And so if Mr. Thornton also doesn't listen to shareholders that could be a problem again."

Munk stepped down as chairman in April in the face of investor criticism, and with the exit of Sokalsky, Thornton is now both more free and under greater pressure to map out a clear strategy to cut Barrick's lofty debt levels, boost profits and eventually raise dividends.

Brad Allen, who advises boards on corporate governance, is not convinced that the new structure is ideal. He argues the best structure would have been a strong CEO, Thornton as a strong chairman, and a strong independent board.

"This move seems to be a continuation of the previous dynasty," said Allen, who heads Branav Shareholder Advisory Services Inc. "It will be interesting to see how the new board responds, as they have their work cut out to demonstrate some credibility in the independence department."

Barrick is emerging from a minor shareholder revolt over a $11.9 million signing bonus for Thornton that Munk acknowledged was his decision entirely. That brouhaha came as Barrick was writing down billions of dollars of assets, some of which were acquired via its C$7.3 billion ($6.8 billion) purchase of Equinox Minerals in 2011, a move also spearheaded by Munk.   Continued...