Osisko Mining Inc.’s shareholders voted in favour of a controversial stock-options package Friday, while its chief executive officer says the company intends to move away from options as a form of compensation over time.
Ahead of Friday’s annual general meeting, proxy advisory firm Institutional Shareholder Services (ISS) advised shareholders of the junior mining company to vote against the package, citing concerns over its excessive cost, and criticizing the lack of performance-based criteria for receiving the options.
At Osisko, options are widely granted to officers, directors and employees, and often make up the lion’s share of compensation. For example, CEO John Burzynski made $3.15-million, with about $2.1-million in options, a $500,000 salary and a $590,000 bonus. Independent director Sean Roosen was paid $743,000 last year, $688,000 in options and a $55,000 cash fee.
In an interview after the AGM, Mr. Burzynski, said that 70 per cent of votes cast at Friday’s AGM were in favour of the options plan, with 30 per cent voting against. The threshold to pass was a majority.
Earlier this week, in a move to appease some of ISS’s concerns, Osisko announced that a portion of Mr. Burzynski’s 2018 compensation will be paid in restricted share units, which are based on achieving certain performance-based metrics. Osisko also announced that it is extending the vesting period on certain options for Mr. Burzynski to five years, instead of three. Governance advocates prefer a longer vesting period because it encourages executives to push for long-term growth, as opposed to short-term gains. At a strike price of $3.46 a share, Mr. Burzynski’s 2018 options are well out of the money, with Osisko’s stock trading around $1.75.
Mr. Burzynski said Osisko intends to move towards paying executives and directors in restricted share units over time, but said it will still likely compensate employees with options. Granting options is seen as a smart way to retain a valued employee, he said.
Historically, stock options were a popular compensation method in the mining sector, but increasingly companies are moving to granting restricted share units. Unlike options, which can expire worthless, share units payable at the market value of the stock at a certain date, usually retain some value.
Mr. Burzynski was part of the team that discovered, funded and developed the Canadian Malartic in Quebec, which is now Canada’s biggest gold mine. Canadian Malartic was sold in a bidding war to Yamana Gold Inc. and Agnico Eagle Mines Ltd. in 2014 for $3.9-billion.
Osisko owns a Quebec gold-development asset, which it hopes to one day develop into a mine.
Niall McGee