Barrick plans board changes as investors urge revamp

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Barrick Gold Corp. has confirmed plans to add independent directors to its board and review how much it pays its executives amid increased shareholder pressure.

The gold producer has faced months of criticism over its weak financial performance, extravagant compensation and the lack of independent mining experts in its boardroom.

But on Tuesday, Barrick said investors can expect an update on its plans before the end of the year.

"The board is in the process of further strengthening its governance practices, through the addition of independent directors, and through improvements to executive compensation practices in line with the principle of pay-for-performance," spokesman Andy Lloyd said.

Earlier this year, a group of seven major pension funds took issue with the Toronto-based miner's decision to pay an "unprecedented" sum of more than $17-million to the company's co-chairman, John Thornton. A majority of stakeholders did not approve that compensation, voting against it and other multimillion-dollar payments to board members, including Barrick's founder and co-chairman Peter Munk.

Barrick's current governance team is now united on the path forward, the company says. The entire board is in "full agreement with respect to initiatives under way to strengthen governance practices, including the appointment of independent directors and improvements to executive compensation practices,." Mr. Lloyd said.

A group of fund managers in Europe is also pressing for board changes and a succession plan for Mr. Munk, according to The Wall Street Journal.

But even if Barrick can address investor frustrations with the board of directors, there are other problems at hand.

Some of the pressures Barrick faces are being felt by the whole mining industry, including increased production costs, weak gold prices and project delays. But Barrick's losses on ill-conceived acquisitions have been high. The gold producer has written off more than $12-billion this year. Barrick shares have plunged over the past year.

David Haughton, an analyst at BMO Nesbitt Burns Inc., said Barrick has been taking steps to address market concerns about its balance sheet and cost overruns and delays at the massive Pascua-Lama project in South America.

On Aug. 1, Barrick announced a second-quarter loss of $8.6-billion (U.S.), including $8.7-billion after-tax impairment charges, and a quarterly dividend cut to 5 cents a share from 20 cents.

Industry analysts say the company, which had $13.4-billion in net debt at the end of June, is trying to shrink its way to profitability by closing high-cost mines and focusing on production at its core assets.

Concerns over both profitability and corporate governance prompted U.S. hedge fund Two Fish Management LLC to send Barrick's management team a long proposal that suggested ways to turn the company around.

Two Fish co-founder Mike Morris says his firm has a relatively small stake in Barrick (mostly through options), but is in touch with other investors in the U.S. and Europe.

Mr. Morris says discussions with industry executives indicates that a new slate of directors will be brought forward in time for the company's next annual meeting next year and will likely be elected. "There's immense pressure on these guys," he said of Barrick's executives. "They'll either fix it themselves or it will be forced on them."

Barrick shares rose 20 cents to close at $18.87 (Canadian) on Tuesday on the Toronto Stock Exchange, up 11 per cent since the second-quarter results were released, but down 55 per cent from their 52-week high of $42.08 in September of 2012.