Nov. 1 (Bloomberg) -- Xstrata Plc awarded some executives bonuses last December to mark the takeover by Glencore International Plc, two weeks after shareholders rejected retention payments exceeding $200 million.
Details of the payments, termed “transaction bonuses,” came to light in a London lawsuit against Glencore filed by Richard Paul Elliston, a former Xstrata company secretary. While Elliston was paid a transaction bonus of 487,925 pounds ($783,000), he is claiming that he should also have been paid 419,000 pounds as severance when he was required to resign from the mining and commodities trading company in August.
Two weeks before the bonuses were awarded, Xstrata investors voted to block a plan to distribute 144 million pounds of retention payments to about 70 managers. That opposition led to the early departures of Xstrata directors including Chief Executive Officer Mick Davis and Chairman John Bond. Xstrata investors agreed to approve the $29 billion takeover by Glencore at the Nov. 20 shareholder vote.
“The task of achieving a merger between Xstrata and Glencore has brought with it many hurdles along the way and has been a real test of our character to rise up and meet such obstacles,” Davis wrote in a Dec. 4 letter to Elliston, included in the court documents, made public this week.
“I would like to thank you for the contribution you have made to get Xstrata to this point of the merger and am pleased to inform you that you have been awarded a transaction bonus,” Davis wrote.
Glencore, based in Baar, Switzerland and the largest shareholder in Xstrata prior to the takeover, with a 34 percent holding, became aware of transaction bonuses after they were paid, a person familiar with the situation said, asking not to be identified as the awards are confidential.
Elliston said in court documents he was unaware he would receive a transaction bonus until he got the letter from Davis and that it was not a term of his employment that a transaction bonus would replace the severance payment.
“It seems like a classic example of firms not wanting to heed investors’ advice on pay,” said Luke Hildyard, head of research at the High Pay Centre, a U.K. monitoring body set up in 2009 after an inquiry into public and private sector remuneration. “These payments should certainly be disclosed and explained.”
Ivan Glasenberg became the CEO of the combined Glencore Xstrata Plc, the world’s fourth-largest mining company. Among the resigned senior Xstrata executives were Charlie Sartain, head of copper, nickel CEO Ian Pearce, and interim CEO of Xstrata alloys Loutjie Smit. Strategy and corporate affairs head Thras Moraitis and chief legal counsel Benny Levene will leave after acting as consultants for six months following the completion of the deal in May.
Davis was paid 4.63 million pounds after terminating an agreement to be CEO of the combined group for six months, Glencore said in April. Davis acted as a consultant to the group until June 30 and was entitled to 30 hours of private use of an Xstrata aircraft in lieu of a consultancy fee, it said.
Glencore dropped 2.3 percent to 332.25 pence by the close in London. The FTSE 350 Mining Index declined 0.9 percent.
The case is: Richard Paul Elliston v. Glencore Services (UK) Ltd., case no. 13-4837, High Court of Justice, Queen’s Bench Division.
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