TORONTO/VANCOUVER Gold mining companies are running a charm offensive with their biggest shareholders on the thorny issue of executive pay, keen to hold onto investors angry about ongoing generous compensation after four years of dire stock returns.
Stung by a reprimand from disgruntled shareholders in proxy votes last year, some miners are meeting investors earlier than ever to win support for compensation plans months ahead of spring 'say-on-pay' votes.
Largely abandoned by generalist funds after a 44 percent drop in gold prices and 70 percent slump in stock values since 2011, the mining firms are desperate to avoid a further exodus of sector-focused funds.
"If you have say-on-pay votes against you and ... you're unwilling to change, people vote with their feet," said London-based Jamie Horvat, who manages the $1.5 billion Vanguard Precious Metals and Mining Fund.
In Canada, home to more large gold producers than any other country, at least three big miners began talking to shareholders last fall about 2016 executive pay, some six months ahead of when miners typically visited investors in past years - if at all - with pay plans.
Mining executives are generally well paid, but the gold industry "is in its own class," said Steve Chan, a principal at executive compensation consultant Hugessen Consulting.
Gold executive pay surged alongside company profits as bullion prices rose nearly five-fold between 2005 and 2011, Chan said. But compensation did not typically follow profits lower as bullion declined.
Cash-strapped miners have reduced costs in every corner - selling assets, closing mines and cutting staff - but CEO pay at the biggest miners is still increasing, a late-2015 study shows.
In 2014, median total pay for mining CEOs rose 8.8 percent to $2.2 million from 2013, mostly due to bigger short-term incentives such as bonuses, said the report from recruiter Swann Global and remuneration consultant HRascent.
"The mining industry is in a world of pain and ... this pain is not being felt in compensation yet," said Jeremy Wrathall of Investec bank, a study partner.
There is little correlation between CEO pay and a company's financial performance, measured by market capitalization, return on equity and other common metrics, the study said.
That conclusion is at odds with wider trends tying pay to measures like shareholder returns. Last year, 69 percent of companies in the S&P 1500 linked compensation to performance, research firm Equilar said.
DIFFERENT THIS SEASON
By November, several miners had called to discuss compensation plans with Joseph Foster, portfolio manager at Van Eck in New York, one of the gold sector's biggest shareholders. Miners outlined performance goals they want to use to calculate executive pay and asked for input.
"It tells me that the final product, this proxy season, will be different than past proxy seasons and we'll see stuff that's more aligned with what shareholders are looking for," he said.
If not, Foster is prepared to sell: "If it's something that's insidious and endemic within a company, then I don't have to own these companies."
Kinross Gold, the world's fifth-biggest producer, began talking to investors in September, versus November a year ago, a spokeswoman said. Eldorado Gold spoke with top shareholders around November and Yamana Gold began such talks last year.
Of the three Canadian shareholder say-on-pay votes that failed in 2015, two were at miners, Barrick Gold and Yamana Gold, which vowed to fix their pay plans. Eldorado has trimmed its executives' pay.
Goldcorp CEO Chuck Jeannes said the downturn is reflected in his equity pay, while Kinross CEO Paul Rollinson said sizeable gaps exist between potential bonus awards and final payouts.
Egregious pay may not deter all investors, some of whom may fear missing a major discovery, 1832 Asset Management fund manager Robert Cohen said.
"If one of these companies goes really well and they didn't own it, because they fussed over a CEO making a million dollars a year too much, they miss out," he said.
(Additional reporting by John Tilak in Toronto; Editing by Paul Simao)