In the face of bonuses that would make traders at Goldman Sachs blush, Barrick shareholders finally pushed back, voting down the proposed pay packages for the gold miner’s top execs. It’s the first time a major Canadian company has ever lost a say-on-pay call.
And while largely symbolic, as Wednesday’s vote isn’t binding, it sends a much-needed message not only to Barrick’s board, but to Canadian investors: There is a line, however faint, distant and trodden, that even the most avarice of execs shouldn’t cross; not when they’ve presided over a 54 per cent collapse in stock price over the past year.
If the seven institutional investors hadn’t stood up to Barrick’s compensation plan, then no say-on-pay action could ever be taken, as this case is about as egregious as it gets. It’s almost Stronach-esque in its audacity. And like the Croesus-sized cheques Stronach has long collected from Magna, the tradition of Barrick’s board paying themselves handsomely dates back years. But even by those standards, last year’s bonuses were rich.
Barrick paid co-chairman John Thornton US$17-million for his troubles in 2012, including US$11.9-million for just joining the board. Former prime minister Brian Mulroney received $2.5 million (including a $1-million bonus) for advising on global affairs and being an ‘ambassador’ for the brand. That’s nice work if you can get it. Even better is the US$12 million outgoing CEO Aaron Regent got for being fired.
In all, six execs were paid US$47.7 million for their achievements on behalf of Barrick last year. Those achievements? They included a US$3-billion write-down on its copper mines in Zambia last year , the outcome of a disastrous $7.3-billion acquisition when copper prices were running at record highs the year before. They also included delays and multibillion-dollar cost overruns at its Pascua-Lama gold mine in the Andes, where a Chilean court has ordered operations to be suspended while pollution issues are explored. The stoppage and subsequent remedial work required ballooned the cost of the project from $3 billion to more than $8 billion, while delaying work up to six months.
Of course, there’s also the Caribbean snafu the company is now grappling with. The Dominican Republic is insisting that Barrick distribute a broader share of the profits from its Pueblo Viejo project, a $3.7-billion gold mine that only recently opened.
At Wednesday’s AGM, Barrick founder and chair Peter Munk described the past year as a “perfect storm”, acknowledging that the company’s pursuit of growth, combined with plunging commodity prices, and unpredictable politics in the countries in which it operates, resulted in constant challenges, driving its stock to its lowest point in two decades.
That’s surely all true, though doesn’t explain why the board chose 2012 as the year to hand out multimillion-dollar signing bonuses and raises to the top execs, including Munk himself, who saw his salary jump 37 per cent to US$4.3-million.
In a country where say-on-pay votes almost exclusively meet with 80 per cent or higher approval, Barrick’s greed finally turned the crowd the other way.