Barrick Gold Corp. has come under fire from Canada's largest pension funds for paying an $11.9-million (U.S.) signing bonus to co-chairman John Thornton even as the embattled gold company faces a raft of setbacks and a plunging stock price.
Seven major Canadian pension funds – including the Caisse de dépôt et placement du Québec, the Ontario Municipal Employees Retirement System (OMERS), Ontario Teachers' Pension Plan and the Canada Pension Plan Investment Board – said the signing bonus was unprecedented in Canada, noting Mr. Thornton's total compensation for 2012 of $17-million.
"It's a question of principle," said Marie Giguère, executive vice-president, legal affairs, at the Caisse. "We see this as something unusual and we felt that it was important to say something."
"We are very strong proponents of pay-for-performance, and this definitely is not an alignment between company performance and compensation – especially when you look at what the share price has not done," said Deborah Allan, director of communications at Teachers.
Toronto-based Barrick declined comment on Friday, but it will have to address the issue at an annual shareholders' meeting in Toronto next Wednesday.
The meeting unfolds after the most tumultuous year in Barrick's 30-year history, when it changed its chief executive officer, announced a multibillion-dollar cost overrun at its flagship gold project in Chile and took a $3.8-billion charge on a highly-criticized copper acquisition.
Though traditionally quiet on corporate governance matters, institutional investors in Canada have increased their activism in some cases in recent years. The complaints about Barrick come as companies across the industry face soaring costs, forcing projects to be abandoned and costs to be slashed.
Adding to Barrick's woes, on Monday gold had its sharpest price correction since the company started trading as a public entity, driving the stock price as low as $17.98 (Canadian) a share this week, its lowest in at least 20 years and less than half its year-ago price. Shares closed at $18.65 Friday.
Mr. Thornton's appointment in June, 2012, was seen as part of a shakeup at Barrick after chairman and founder Peter Munk publicly chastised the board and management for the company's poor– performing stock price despite record profits.
"There's no doubt the package that this guy Thornton got is high by any Canadian standards for a chairman," said Steve Chan, a principal at Hugessen Consulting, a firm that advises boards on pay issues. "That said, Barrick, like the rest of the gold sector, faces headwinds and the board's job is to have the best possible people in their seats to help them through these times."
The company said in a recent circular that Mr. Thornton's signing bonus was "an inducement for Mr. Thornton to assume the co-chairman position and make a substantial commitment of his time to Barrick."
Investors opposing the compensation said in a news release Friday they would vote against both an advisory resolution on executive compensation and the election of the members of the Barrick board's compensation committee. The group – which collectively manages some $916-billion in assets – say they also sent a letter of complaint to Mr. Munk.
"At a time when shareholders have suffered under-performance, the total compensation to the newly appointed co-chairman Thornton appears problematic without sufficiently justified rationale and given the magnitude of total compensation paid that none of the components of his compensation are performance-based," influential governance advisory firm Institutional Shareholder Services said in recommending shareholders vote against the compensation.
Beyond Mr. Thornton, six executives at Barrick were paid a total of $47.4-million last year, with one who is departing getting an additional $12-million.
Mr. Munk received $4.3-million, up from $3.7-million in 2011. Former prime minister Brian Mulroney, a director, was paid close to $2.5-million for his role as a global affairs adviser and for "acting as an ambassador."
"We believe that compensation should not be based on hopes or aspirations," said Robert Gill, a portfolio manager at Aston Hill Asset Management, a Barrick shareholder. "Compensation should be commensurate with performance. It should reflect tangible achievement."
Barrick Gold (ABX)