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Newmont, Goldcorp Need To Address Bloated Compensation Plan- Shareholders' Gold Council

Kitco News

(Kitco News) - Newmont Mining’s proposed merger with Goldcorp faces new drama even as a proposed takeover of Newmont by Barrick Gold Corp ends due to a joint venture agreement instead.

This time, Newmont and Goldcorp are being taken to task over executive management compensation as a result of the proposed merger. Over the weekend, the Shareholders’ Gold Council (SGC) expressed its condemnation of Goldcorp’s board approving an additional retirement payment to Ian Telfer, chairman of Goldcorp.

Under the agreement with Newmont, if the merger goes through, Telfer will be entitled to receive a lump sum payment retirement allowance from Goldcorp equal to approximately US$12 million, an increase from his current entitlement of approximately US$4.5 million.

The SGC said that the new payout agreement is a blatant disregard for alignment between executive compensation and the interests of Goldcorp’s shareholders. The group added that the payout comes as the Goldcorp board has destroyed $3.7 billion in shareholder value since 2006.

“While Goldcorp is telling its shareholders to sell their shares close to a 13-year low, Goldcorp management stands to reap over US$33 million in potential change of control payments,” the group said in its statement. “SGC asks that the Goldcorp Board and the Newmont Board each publicly state how increasing Mr. Telfer’s retirement allowance benefits their respective shareholders.”

Adrian Day of Adrian Day Asset Management, an investment firm that is a member of the SCG had more harsh words about the proposed compensation packages.

“To triple Telfer’s payment right before the acquisition is one slap in the face too many, an insult to shareholders,” he said. “We intend to vote against the merger with Newmont if this payment is not rescinded. We have no voice in these payments, so this is our only way to make our position clear.”

The council added that it is supportive of continued consolidation within the mining sector.

“SGC believes that continued consolidation in the gold sector is plainly necessary so that the enrichment of directors and management teams at the expense of shareholders comes to an end by ridding the industry of poor stewards of shareholder capital,” the group said.

The SGC was launched last fall by John Paulson's U.S. hedge fund Paulson & Co. in an attempt to protect shareholder value in the mining space. The council is led by Christian Godin and some of the firms and fund managers backing it include Adrian Day Asset Management, Apogee Global Advisors, AMG Fondsverwaltung AG, Delbrook Capital, Equinox Partners LP, Equity Management Associates, John Hathaway, Kopernik Global Investors, Livermore Partners, La Mancha and Sun Valley Gold.

Goldcorp shareholders will vote April 4 on whether to merge with Newmont to create the world’s largest gold-mining company.

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