(Adds response from Barrick director on retention)
By Allison Martell
TORONTO, March 31 Barrick Gold Corp
unveiled a new executive compensation plan on Monday, and lead
director J. Brett Harvey said the company might select two new
board members after its annual meeting on April 30.
Under the plan, effective for 2014, the largest part of top
executives' compensation would be based on performance, paid in
units that convert into Barrick shares and that cannot be sold
until the executive retires or leaves the company.
The plan, detailed in a regulatory filing, is the latest
move by Barrick to improve governance after a series of missteps
in recent years angered investors. At last year's annual
meeting, shareholders voted down a nonbinding resolution on
"We heard the shareholders loud and clear. We understood
what they had to say," Harvey, who chairs the compensation
committee, told reporters on Monday.
In December, Barrick said two longtime directors would not
stand for re-election and announced four new board nominees.
It also confirmed that the company's founder, Chairman Peter
Munk, would step down at the annual meeting and be replaced by
Co-Chairman John Thornton.
Harvey said the company was "probably going to pick up two
more" directors after the annual meeting.
He said the new compensation plan is meant to better line up
management's interests with those of shareholders: "The theme
internally became, instead of having wealthy managers, we wanted
wealthy owners that were managers."
Harvey said he is not aware of any peer companies that place
the same restriction on selling share awards.
One company that has introduced a similar plan is HSBC
Holdings, which overhauled its pay scheme when Thornton
was chair of its compensation committee. HSBC Holdings'
executives must retain long-term share awards until they retire
Shares awarded under Barrick's new long-term incentive plan
take three years to vest, and if executives leave to join a
competitor they forfeit shares that have not vested. Shares that
have vested become available over two years.
Frank Glassner, chief executive officer of Veritas Executive
Compensation Consultants, said even with penalties, the plan
could give executives an incentive to leave the miner.
"We don't want to incent them for leaving. We certainly
don't want to punish them for their good performance in staying,
either," he said.
While deferring some compensation is not uncommon, he said,
three to five years is a best practice.
Yvan Allaire, executive chairman of the board of the
Institute for Governance of Private and Public Organizations,
was positive about the plan overall
"It's a giant step in the right direction," said Allaire,
praising the move towards share awards over stock options.
Options have fallen out of favor in recent years in part
because of concerns they encourage short-term thinking, and
offer executives gains if their company's stock rises without
downside risk if it falls.
But Allaire also said the plan could cause retention issues.
In an emailed statement, Harvey said the system is meant to
create a management team "personally vested" in Barrick's
"In developing our new system, we looked at other companies
who use a similar approach and they have found that it is
actually a motivating factor in the retention of key
executives," he said.
"WE HEARD THE SHAREHOLDERS"
Thornton's total compensation was $9.5 million in 2013,
including a $5 million cash award that he has committed to use
to buy and hold Barrick shares. Last year, he bought shares with
his controversial $11.9 million signing bonus.
Barrick said all shares awarded under the long-term
compensation plan will be bought on the open market to avoid
dilution. It also laid out new minimum ownership requirements,
which among other things will require the chief executive to own
shares worth 10 times base salary by 2020.
Last year, proxy advisory firm Glass Lewis had recommended
that its clients withhold votes from three Barrick directors at
the annual meeting, criticizing Thornton's signing bonus and the
severance paid to outgoing Chief Executive Aaron Regent, among
"In terms of large, discretionary packages, I think we heard
the shareholders on that," Harvey said. "I think we'll be very
hesitant to do that kind of thing."
(Editing by Jeffrey Hodgson, Andre Grenon, Peter Galloway and