A lucrative retirement package for the chairman of Goldcorp is raising the hackles of investors ahead of a key vote on the company’s planned merger with Newmont Mining.
Ian Telfer’s retirement allowance will rise to roughly $12-million from $4.5-million if the miners merge, according to a regulatory filing from Vancouver-based Goldcorp, once the world’s largest gold miner by market value. Initially, the plan was for Telfer, 72, to join Newmont’s board as deputy chairman. On Tuesday, Goldcorp announced he wouldn’t accept the new job.
A group of investors tracking the merger welcomed the decision, but in an emailed statement said the two mining companies “have still failed to justify how the threefold increase in the payment to Mr. Telfer is in the best interests of their respective shareholders.”
Rich parachute payments granted to company leaders who may lose jobs following a merger sometimes come under fire from investors, but they rarely are controversial enough to scuttle a multi-billion dollar deal. Goldcorp investors are set to vote April 4; Newmont’s vote is April 11.
Goldcorp’s attempt to top-up its chairman’s retirement haul has met significant resistance. The stock has plummeted 75% since its 2011 high, and the company fell short of almost every target when it last reported earnings. Meanwhile, Telfer has collected $900 000 in average annual compensation since becoming chairman in 2006 and reaped at least $35-million from exercising stock options, according to data compiled by Bloomberg.
The retirement package is “completely oppositely aligned with long-term shareholders, and a terrible outcome,” John Qian, an analyst at T. Rowe Price Group, said in an email Wednesday. “He is getting paid for destroying a ton of value over his tenure then selling at a low," he wrote. "In what world is that worthy of a massive payout?”
T. Rowe owns 2.3% of Newmont’s shares. Qian declined to comment on how the firm will vote its shares on the merger.
Telfer’s increase was granted in light of him giving up years of incentives and bonuses by stepping down as chief executive officer in 2006 and instead taking the chairman role, Goldcorp said in its filing. A Goldcorp spokeswoman declined to comment. A Newmont representative deferred questions to Goldcorp.
On Monday, a coalition of gold investors backed by billionaire John Paulson and Naguib Sawiris, chairman of Orascom Investment Holding SAE, accused Telfer of “pillaging Newmont shareholders” and called on the boards of both companies to explain how the proposed retirement package would benefit investors.
One member of the group, Adrian Day of Adrian Day Asset Management, which holds a small, nominal stake in both companies, said he would vote against the merger if the payment stayed.
The 17-member shareholder group, known as SGC, had previously accused Telfer of presiding “over one of the most disastrous and egregious examples of shareholder value destruction in the mining industry.” It had also criticized the multi-million dollar exit package Goldcorp’s CEO David Garofalo stands to receive if he loses his job as a result of the transaction, calling it “outrageous.”
Newmont spent the last month fending off hostile advances from Barrick Gold, its largest rival. On Monday, the two firms agreed to forming a friendly joint venture, clearing way for Newmont to focus on securing shareholder approval for its $10-billion offer to buy Goldcorp.
Telfer “is a long-time friend, whom I have a lot of professional respect for, but the combination of this special bonus, his prior special bonus, stepping down as CEO and his continuing role appears excessive,” Rick Rule, CEO of broker-dealer Sprott US Holdings, said by text on Wednesday, voicing his personal opinion. Sprott’s parent holds a small stake in Newmont.
Rule also noted that public disclosures had flagged the possibility of Telfer’s compensation rising with a change of control transaction. “Shareholders need to demand and assert a much bigger role in most aspects of corporate governance,” he said.