NEWS
04/28/2015 06:36 EDT | Updated 06/28/2015 01:12 EDT

Say on pay: investors to speak up at Barrick Gold shareholder meeting

TORONTO - Another week, another say-on-pay vote worth watching.Executive compensation will be in the spotlight when Barrick Gold Corp. (TSX:ABX) holds its annual shareholder meeting in Toronto later today.The Canada Pension Plan Investment Board said last week it would be voting against the miner's say-on-pay plan and will withhold its vote for the head of Barrick's committee for executive compensation, Brett Harvey.The concerns, which have been raised by other institutional investors, centre around executive chairman John Thornton's paycheque, which grew to $12.9 million in 2014 from $9.5 million the previous year.Meanwhile, Barrick's financial performance has weakened.In the first quarter of 2015, it had US$57 million of net income and US$62 million or adjusted net earnings, down from $88 million of net income and US$238 million of adjusted net earnings a year earlier, the company reported Monday.Barrick also said Monday that it's on track to achieve its target of $30 million in savings from reduced general, administrative and overhead costs in 2015, reaching $70 million in annualized savings in 2016.However, adjusted earnings was five cents below the estimate of 10 cents per share and net income was a penny below the estimate of six cents per share, according to data compiled by Thomson Reuters.Corporate governance expert Richard Leblanc says the vote on executive compensation is non-binding, but may act as a form of moral suasion.Last week, there was another notable say-on-pay vote at the annual general meeting of the Canadian Imperial Bank of Commerce in Calgary (TSX:CM).Shareholders shot down the bank's approach to executive compensation, with nearly 57 per cent of shares cast against. It was the first time such a vote has gone that way at a major Canadian financial institution.At issue were rich payouts to the bank's former chief executive officer and chief operating officer — $25 million between the two of them, on top of their existing pensions.Leblanc, an associate professor of law, governance and ethics at York University, said he's happy to see big shareholders adopt "less of a Canadian, old-school, genteel mentality" and speak up."I think what CIBC and Barrick say is that investors are becoming less accepting and less tolerant," he said Leblanc. "This is long overdue in Canada."Shortly after prominent proxy advisory firms ISS and Glass Lewis recommended against Barrick's say-on-pay proposal, the company responded with an eight-point argument on why Thornton's compensation is appropriate.It highlights a "vigorous" board renewal process driven by Thornton, new hires into senior roles and improvements to the company's business model, among other things.The miner said it has "designed a compensation system that would breed emotional and financial ownership among its decision makers."Paul Gryglewicz, managing partner at Global Governance Advisors, said companies are realizing they need to do a better job justifying their pay practices to shareholders.That could take the form of detailed rebuttals to criticism, like the one Barrick issued earlier this month. Or it be something akin to an "investor roadshow" — instead of executives touring around to talk up their business strategy, it could be the company's executive compensation committee chair or human resources head explaining how the executive pay structure works."I think you're going to see a greater degree of planning," said Gryglewicz. "That's the kind of proactive engagement they're going to start to do."Follow @LaurenKrugel on Twitter