Barrick Gold Corp. (ABX), criticized by investors for its pay practices as the stock plunged, cut compensation for co-Chairman John Thornton and Chief Executive Officer Jamie Sokalsky, and will force them to hold their shares as long as they work for the gold miner.
Barrick is creating the “most shareholder-friendly” compensation program of any Canadian company, the world’s biggest gold producer said today in a statement.
Thornton was awarded $8.9 million for 2013 excluding pension costs, down from $16.8 million the previous year, which included an $11.9 million signing bonus. Thornton’s pay is 20 percent higher than Sokalsky’s, who was awarded about $7.4 million, the company said in a filing. Thornton’s pay includes $5 million in cash to be used to buy Barrick stock.
“It’s a step in the right direction,” Steve Chan, principal at Hugessen Consulting Inc. in Toronto, which advises boards on compensation, said today in a telephone interview. “The policy appears to be well thought out and presented. The approach to holding equity to retirement is novel in Canada.”
Still, the compensation plan is light on details about how Thornton’s pay package will be determined beyond the current year, Chan said.
“It is curious to us that there there is no information really on the sizing and performance of the chairman-nominee’s go-forward compensation given the attention that was paid to it last year,” he said. “You’d think there would be a little more information.”
Barrick fell 2.8 percent to close at C$19.68 in Toronto. The shares gained 5.2 percent this year.
The company acknowledged in September it was reexamining its compensation policies after Canada’s biggest pension funds criticized the gold miner for awarding Thornton the signing bonus that they said set a “troubling precedent.” Eighty-five percent of the votes at the annual meeting that month were cast against the company’s approach to executive pay.
“That was pretty dramatic to see that vote,” Brett Harvey, the Barrick director who is also chairman and CEO of Consol Energy Inc., said in Toronto today. “I didn’t like it and I was on the comp committee. So obviously we had to step forward and put a plan together that made sense.”
Thornton received some “pretty strong feedback” from shareholders over his signing bonus last year, Harvey said.
The pension funds also said later in the year that Barrick needed more independent board members. In December, the company announced Chairman Peter Munk would retire after more than 30 years and nominated four new directors. Barrick said that Directors Howard Beck and former Canadian Prime Minister Brian Mulroney won’t stand for re-election at the shareholders meeting, which is scheduled for April 30.
Munk was awarded $3.91 million for the year, down from $4.3 million.
The moves in December capped about 18 months of turmoil at Barrick, which fired its CEO in 2012 following a disastrous copper acquisition, revealed ballooning costs at its biggest construction project and faced the largest gold-price slump in three decades, spurring $8.7 billion of writedowns.
Barrick responded by selling assets, firing workers and cutting its dividend. Barrick’s shares plunged by almost half in 2013 as gold prices fell.
As part of the compensation plan unveiled today, executive pay will be assessed relative to performance measured against a scorecard disclosed to investors in advance, Barrick said in the statement. What’s more, a smaller portion of total compensation will be awarded as an annual bonus, the company said.
The plan doesn’t link executive compensation to Barrick’s stock performance relative to its peers, Chan said.
“There doesn’t appear to be a test of relative shareholder performance in the new plan, which has been the company’s Achilles’ heel,” he said.
To contact the editors responsible for this story: Simon Casey at email@example.com Robin Saponar, Steven Frank