April 9, 2015 / 9:04 PM / 3 years ago

Proxy firm advises Barrick shareholders to reject pay plan

TORONTO, April 9 (Reuters) - The influential proxy advisory firm Glass Lewis is recommending that shareholders vote against Barrick Gold Corp’s executive compensation plan, while flagging “serious concerns” with the executive chairman’s pay.

The Toronto-based company 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.

But 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 the process to determine Thornton’s compensation in detail.

His performance is evaluated against a series of “concrete initiatives”, a Barrick spokesman said, and that evaluation is used by a committee to determine compensation.

More than half of Thornton’s compensation in 2014 was used to purchase Barrick shares that must be held until retirement, the spokesman added.

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)

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