April 9, 2015 / 9:09 PM / 3 years ago

Proxy firm advises Barrick shareholders to reject pay plan

TORONTO (Reuters) - Influential proxy advisory firm Glass Lewis is recommending that shareholders vote against Barrick Gold Corp’s (ABX.TO) executive compensation plan, while flagging “serious concerns” with the executive chairman’s pay.

Toronto-based Barrick introduced a new compensation program last year after a shareholder outcry in 2013, but it still resulted in Executive Chairman John Thornton being paid $12.9 million, or one-third more than in 2013.

At its annual meeting in Toronto on April 28, Barrick will consider an advisory resolution on executive compensation. While non-binding, such “say on pay” votes can send a message of shareholder discontent to companies.

Michael Sprung, president of Sprung Investment Management, said he thought most money managers would vote against the executive compensation plan.

“Their (Barrick‘s) approach the last few years does not seem to have served the shareholders that well. It seems to have served management quite well,” said Sprung, whose firm holds Barrick shares.

Under Barrick’s new plan, announced in March 2014, the largest part of top executive compensation is based on performance and paid in units that convert into Barrick shares that cannot be sold until an executive retires or leaves the company.

Thornton does not participate in this “innovative” plan, Glass Lewis said, and instead has a “unique and less structured compensation program” tailored to his role as chairman, with vague performance considerations.

“Given the absence of any clear threshold, target or maximum compensation levels, shareholders may find Mr. Thornton’s compensation to be a ‘black box,’ whereby the potential amounts to be paid each year are unknown and completely discretionary,” the report said.

Barrick, the world’s largest gold producer by output, said its information circular lays out in detail the process that determines Thornton’s compensation.

“The pay-for-performance principles used to determine compensation for the chairman are the same as those applied to the management team,” Barrick spokesman Andy Lloyd said in an email.

“Just as with management, the chairman’s performance is evaluated against a series of concrete initiatives disclosed to shareholders in advance, and a majority of his compensation is long-term in nature in the form of common shares that must be held until retirement.”

Despite Thornton’s accomplishments in 2014 and Barrick’s narrowed annual loss, to $2.50 a share from $10.14 in 2013, his “exorbitant” pay package is concerning, the report said.

Like other gold producers, Barrick faced tough conditions in 2014 as bullion prices stayed one third below 2011 peaks. The company’s stock underperformed peers last year, falling 39 percent, compared with the S&P/TSX Global Gold Index’s .SPTTGD 7 percent decline.

Reporting by Susan Taylor. Editing by Andre Grenon

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