| TORONTO, July 21
TORONTO, July 21 Worried they are being given
the cold shoulder by an imperious leadership, shareholders of
Barrick Gold Corp, the world's biggest gold miner, are
taking a "show me" approach to the company's latest management
Barrick said last week that Chief Executive Jamie Sokalsky
will leave the company in September. He will be replaced by two
co-presidents, a move that concentrates power in the hands of
Executive Chairman John Thornton, a man handpicked for the job
by Peter Munk, who founded the company and ran it his way for
"The concern in this situation is that the person setting
the strategy does not listen to the shareholders, who are the
real owners of the company," said Chris Mancini, an analyst at
Gabelli Gold Fund, which owns more than 2.4 million shares in
Barrick according to Thomson Reuters data.
"There was a concern within the market that Mr. Munk was not
listening to shareholders...And so if Mr. Thornton also doesn't
listen to shareholders that could be a problem again."
Munk stepped down as chairman in April in the face of
investor criticism, and with the exit of Sokalsky, Thornton is
now both more free and under greater pressure to map out a clear
strategy to cut Barrick's lofty debt levels, boost profits and
eventually raise dividends.
Brad Allen, who advises boards on corporate governance, is
not convinced that the new structure bodes well. He argues the
ideal structure would have been a strong CEO, Thornton as a
strong chairman, and a strong independent board.
"This move seems to be a continuation of the previous
dynasty," said Allen, who heads Branav Shareholder Advisory
Services Inc. "It will be interesting to see how the new board
responds, as they have their work cut out to demonstrate some
credibility in the independence department."
Barrick is emerging from a minor shareholder revolt over a
$11.9 million signing bonus for Thornton that Munk acknowledged
was his decision entirely. That brouhaha came as Barrick was
writing down billions of dollars of assets, some of which were
acquired via its C$7.3 billion ($6.8 billion) purchase of
Equinox Minerals in 2011, a move also spearheaded by Munk.
Toronto-based Barrick has taken steps to deal with investor
unrest and questions about boardroom independence. It shuffled
its board late last year and unveiled a new performance-based
pay scheme for executives in March.
But the ouster of Sokalsky, who had moved rapidly to
stabilize Barrick over the past two years as it wrote down its
billions, raises questions about Thornton's vision.
One source briefed on the matter said Thornton plans to make
more changes as he feels there are skills the current board is
lacking. Such moves could also serve to solidify his position.
COLLAPSE OF NEWMONT TALKS
The company says the management shakeup should not elicit
corporate governance concerns.
"It is admittedly unorthodox not to have a CEO but it's more
about a culture and behavior that the board is trying to drive
with the new structure," said Barrick spokesman Andy Lloyd. "It
is very much focused on the things the board believes will make
Barrick successful in the long run."
Some investors are not persuaded.
One source, who asked not to be named as it was against his
firm's policy to comment to media on specific companies, said he
is not convinced by Thornton's performance so far, noting the
flameout of recent merger talks between Barrick and Newmont
Those talks descended into acrimony in April with the two
miners publicly accusing each other of scuppering the deal.
Newmont publicly singled out Thornton and Munk for the failure,
and sources familiar with the matter told Reuters at the time
that the talks had hit a snag on how power would be shared at
the board level within the combined entity.
"While Jamie's planned departure might rekindle another
round of merger hopes, we doubt this will be the case near term
given the less than amicable end to the discussions," said Citi
analyst Brian Yu in a note to clients.
That Thornton has much to prove is also evidenced by the
fact that he has not pulled off any major coups since joining
the board two years ago amid high expectations that the former
Goldman Sachs executive and China expert would bring much
to Barrick through his impeccable connections.
Thornton, however, was central to sealing a joint venture
deal with Ma'aden, or Saudi Arabian Mining Co, earlier
this month. That deal is set to kickstart Barrick's long-delayed
Jabal Sayid copper asset in the kingdom.
So while skeptical, investors may be willing to give
Thornton some time to lay out his plans.
"This is definitely a 'show me' type of situation," said
Donald Reed, head of Franklin Templeton Investments, which owns
some 515,000 shares in Barrick, according to Thomson Reuters
data. He added that a good indicator for the market would be to
see Barrick in a position to raise its dividend once again.
Also sure to silence some skeptics would be an uptick in the
company's stagnating share price.
"Shareholders at this point will take a limited wait and see
approach, but the clock is ticking for Thornton to do something
significant that delivers shareholder returns sooner rather than
later," said Allen of Branav.
(Editing by Peter Galloway)