TORONTO (Reuters) - Barrick Gold Corp ABX.TO, already under pressure from setbacks at its largest development project and a slump in the price of gold, now faces a shareholder revolt over a “troubling” payment to a member of its board.
A group of Canada’s top pension funds, small but significant shareholders in the world’s largest gold miner, said on Friday it opposes Barrick’s $11.9 million signing bonus for co-chairman John Thornton, the man tipped as the miner’s next chairman.
“This compensation is inconsistent with the governance principle of pay-for-performance and is therefore disproportionate and sets a troubling precedent in Canadian capital markets,” the group said in a statement.
Barrick has faced a raft of problems in recent months, including a slumping gold price, and a partial halt to work at one of its main growth projects, Pascua-Lama, on the border of Argentina and Chile.
Shares of the company have fallen more than 37 percent this month and have more than halved in value over the last year.
The stock rose 1.1 percent on Friday, after the group of funds said it would vote against Barrick’s advisory resolution on executive compensation and against the election of the members of the compensation committee at Barrick’s annual meeting in Toronto, on April 24.
Barrick declined comment on Friday, but in its proxy circular to shareholders ahead of the meeting, Barrick said the advisory resolution on executive compensation is “not binding” on the board.
“The board and, in particular, the compensation committee will consider the outcome of the vote as part of its ongoing review of executive compensation,” it added.
Barrick also has a majority voting policy in its corporate governance guidelines, so a director must resign if more shares are withheld from him or her than are voted in favor.
Thornton, widely expected to succeed founder and Chairman Peter Munk, has been a Barrick director since February, 2012, and is also on the boards of China Unicom (Hong Kong) Ltd 0762.HK, HSBC Holdings HSBA.L, and Ford Motor Co F.N.
A former president at Goldman Sachs GS.N, he has served on the boards of News Corp NWSA.O and Intel Corp INTC.O, among others.
In a letter to shareholders released in March, Munk said it was time for Barrick to “consider a path to new leadership at our board level.” He listed the qualifications Barrick was looking for, and singled out Thornton as his likely successor.
The pension funds are not alone in expressing concern about payments from Barrick. Earlier this month, proxy advisory firms Glass Lewis and Institutional Shareholder Services, advised clients to vote against Barrick’s executive compensation plan.
“At a time when shareholders have suffered underperformance, the total compensation to the Co-Chairman Thornton appears problematic without sufficiently justified rationale,” ISS said.
Barrick reported a net loss of $665 million in 2012, due to a large writedown. Excluding items, the company reported profits of $3.83 billion, down from $4.67 billion, a year earlier.
Glass Lewis also said it was concerned by the number of the number of boards that Thornton sits on.
But it stopped short of urging shareholders to withhold their votes for Thornton.
Glass Lewis is owned by Ontario Teachers’, which is one of the funds objecting to Thornton’s pay package. The advisory firm says Teachers’ is not involved in the day-to-day management of Glass Lewis, and the proxy voting and governance policies of Glass Lewis are separate from those of Teachers’.
The group of funds opposing the payments comprises Canada Pension Plan Investment Board, the Ontario Teachers’ Pension Plan and Caisse de dépôt et placement du Québec, as well as Alberta Investment Management Corp, British Columbia Investment Management Corp, Hermes Equity Ownership Services, Ontario Municipal Employees Retirement System, and Public Sector Pension Investment Board.
“The purpose is to alert people to the fact that this a matter of principle for us,” said Marie Giguère head of legal affairs for Caisse, noting that the group believes it has support from other investors. “We think this in objectionable and unheard of.”
The group of pension funds owns roughly 3.5 percent of Barrick’s outstanding stock, or some 34.8 million shares, according to Thomson Reuters data and fund disclosures. That stake was worth $640 million at Thursday’s closing price of C$18.44 in Toronto.
Brad Allen, who heads Branav Shareholder Advisory Services, a firm that counsels boards on ways to mitigate shareholder risk, said the group’s very public statement was a way to increase pressure on Barrick.
“Three years ago, you’d never have seen these guys putting out press releases or anything. It would all be behind the scenes,” he said. “I think this move by the group of funds is an attempt to quickly get word out to other shareholders ... and see whether others want to tag on.”
Additional reporting by Andrea Hopkins; Editing by Janet Guttsman, Dan Grebler and Tim Dobbyn