Funds blast Goldcorp chair’s ‘terrible’ $12 million package

Goldcorp chairman Ian Telfer in his Vancouver office – CollectiveYou photo

A lucrative retirement package for the chairman of Goldcorp Inc. is raising the hackles of investors ahead of a key vote on the company’s planned merger with Newmont Mining Corp.

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.

“I’m appalled by it,” said Joe Foster, a portfolio manager at VanEck, the second-largest Goldcorp shareholder, according to Bloomberg data on filings as of Dec. 31. “They put the current management in place three years ago, and they’ve done a very poor job of operating the company, and it shows in their results. To reward that poor performance with these huge payouts is a crime in my view.”

Meanwhile, the Shareholders’ Gold Council welcomed Telfer’s decision not to join Newmont’s board, but the group 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.”

He is getting paid for destroying a ton of value over his tenure then selling at a low

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 almost 75 percent 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.

‘Completely opposite’

The retirement package is “completely oppositely aligned with long-term shareholders, and a terrible outcome,” John Qian, an analyst at T. Rowe Price Group Inc., 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 percent 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.

“He’s got a pretty generous salary or whatever they call it,” VanEck’s Foster said in an interview in New York. “He’s very well compensated already. I don’t see why he should be rewarded for poor performance.”

On Monday, SGC, the 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.

Merger vote

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 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.”

The 17-member shareholder group had previously accused Telfer of presiding over one of the most disastrous and egregious examples of shareholder value destruction in the mining industry

Newmont spent the last month fending off hostile advances from Barrick Gold Corp., 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.

‘Appears excessive’

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 U.S. 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.

(By Danielle Bochove and Anders Melin)