Pressure on Barrick Board Centers on Long-Time Directors
Investor pressure to change the board at Barrick Gold Corp. (ABX), the world’s biggest producer of the metal, is centering on long-serving directors, including former Canadian Prime Minister Brian Mulroney.
Canada’s biggest pension funds want new independent board members and say the miner should consider replacing directors who have been there longer than 20 years and are close to Co-chairman and founder Peter Munk, according to two investors briefed on the matter who asked not to be identified because the information hasn’t been made public.
Barrick said yesterday it will add new independent directors and strengthen its executive pay policies after investors criticized governance at the company. The gold miner took $8.7 billion of writedowns in the second quarter and cut its dividend 75 percent after gold prices fell the most in three decades.
“The tenure on the board is far too long and there are far too many non-independent directors,” said Robert Gill, a Toronto-based fund manager at Aston Hill Financial Inc. (AHF), which manages C$7.8 billion ($7.6 billion), including Barrick shares. “It’s time to change the board and we need to bring in more independence into the board,” he said by phone Sept. 11.
Barrick plans to announce progress on the moves by the end of the year, Andy Lloyd, a company spokesman, said in an e-mailed statement. Independent directors have been meeting with shareholders since the company’s April annual general meeting to discuss governance matters, including compensation, he said.
“Barrick takes matters of governance seriously and feedback from our shareholders is important to us,” Lloyd said. “There is no disagreement on this process at the board.”
Canada’s six biggest pension fund managers in April criticized as excessive an $11.9 million signing bonus for Co-chairman John Thornton.
Spokesmen for Canada Pension Plan Investment Board, Caisse de Depot et Placement du Quebec, Ontario Teachers’ Pension Plan Board, the Public Sector Pension Investment Board, Alberta Investment Management Corp. and Ontario Municipal Employees Retirement System didn’t immediately return phone calls and e-mails seeking comment today.
Calls to Mulroney’s Montreal office seeking comment weren’t immediately returned.
While Munk said in April he found a successor in Thornton, a former Goldman Sachs Group Inc. president who was named Barrick co-chairman in June 2012, the gold miner hasn’t announced a date for Munk’s departure. It’s “appropriate” that the company considers a path to new leadership at a board level, Munk wrote in Barrick’s annual report filed March 25.
Barrick, which rose 8.6 percent to C$20.50 at the close in Toronto, has dropped 50 percent in the past 12 months. In that time the 49-company Standard & Poor’s/TSX Global Gold Sector Index has declined 44 percent.
Barrick has told institutional investors it’s looking for two to three new independent directors, according to the two investors who asked not to identified.
Three of the company’s 13 directors -- Munk, William Birchall and Howard Beck -- have been in place since Barrick was created in 1984, according to a March 25 filing, while Mulroney joined the board in 1993. Anthony Munk, the founder’s son and a managing director at private-equity firm Onex Corp., was brought on in 1996.
Anthony Munk didn’t immediately respond to a phone message seeking comment today. Birchall and Beck weren’t immediately available to comment, Lloyd said today by phone.
Munk should step down as part of efforts to revitalize the miner’s board, according to Aston Hill and ASA Gold and Precious Metals Ltd., which also holds Barrick stock.
“We’ve had concerns over the governance issues at Barrick for quite some time, specifically the level of compensation, the level of influence that the executive chairman has over the board and management and in the selection of other board members,” ASA CEO David Christensen said in a phone interview. The San Mateo, California-based company manages $300 million. “Essentially we believe this board is in need of restructuring.”
Dutch pension fund manager PGGM Vermogensbeheer BV is leading a group of about 10 mainly Europe-based fund managers preparing to send a letter to Barrick demanding faster boardroom changes and a succession plan for Munk, the Wall Street Journal reported yesterday, citing people familiar with the matter. Catherine Jackson, a corporate-governance adviser at PGGM, said the fund wants Barrick to replace some of its long-serving directors, the report said.
Jackson isn’t available to comment, Maurice Wilbrink, a PGGM spokesman, said today in an e-mail.
At least two new, independent highly qualified directors, including at least one mining engineer and geologist, should be elected to the board in the “short term,” Two Fish Management LLC, a U.S. hedge fund, said in an August presentation posted on its website.
“It will probably have to be at next year’s AGM but I think it should be happening immediately,” Two Fish founder Mike Morris said in a Sept. 16 phone interview.