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The Peter Munk-led dynasty on Barrick Gold Corp.'s board has become like a bad Saturday Night Live sketch – seemingly endless, not that clever, and it stopped being entertaining a long time ago.
The Wall Street Journal reported Tuesday that roughly 10 European shareholders are about to send the Barrick board a letter, urging them to get on with the overhaul of the board that was promised months ago, but has yet to be delivered. They join the chorus of institutional investors who are deeply unhappy with a leadership marred by Richie-Rich pay packets and Keystone Kops decision-making.
The first order of business is to get Mr. Munk out.
Mr. Munk has been the face and the driving force of Barrick for 30 years. He founded the company and has long wielded the kind of power over it usually reserved for a controlling shareholder. But he's far from a controlling shareholder; at last report, he owned 0.2 per cent of Barrick's stock. Sixty-six shareholders rank ahead of him. And a lot of them have heard all they care to hear from him, other than "goodbye."
The past several years under his guidance have been marked by a litany of expensive missteps. Barrick stumbled its way out of a gold hedging program that cost the company billions. It bought asset after asset at unjustifiably high prices that blew up it its face when gold prices retreated. It strayed big-time from its precious-metals lifeblood to jump into the copper business – resulting in a writedown of nearly $4-billion earlier this year. The company is swimming in debt (nearly $16-billion at last report); its stock is worth less than half of what it was a year ago.
In the midst of this comedy of errors, the Barrick board saw fit to reward Mr. Munk with a raise; he was paid $4.3-million last year as chairman, and his base salary ($2.5-million) was up 67 per cent from the year before. Another board member, former Canadian prime minister Brian Mulroney, received $2.5-million as "senior adviser, global affairs," a position the company describes as "an ambassador for Barrick."
But the last straw for many investors was the $17-million paid to Mr. Munk's new co-chairman, John Thornton – including an $11.9-million signing bonus. Angry shareholders voted 85 per cent opposed to the company's compensation plan in a non-binding vote last spring.
The company took the message and started talking about fixing its board – which is far too deferential to Mr. Munk, has too many Munk cronies who are well past their best-before date, and doesn't have enough independent directors to meet governance best practices. It is assumed that this will finally mark the retirement of the 85-year-old Mr. Munk.
Yet months have gone by, and Barrick continues to waffle over potential candidates for new independent directors. The foot-dragging hints that Mr. Munk may be orchestrating his final act: To hand-pick a board that will continue the company in his image.
Enough is enough. This company has to move out from under the shadow of Mr. Munk; it needs a new governance structure devoid of his fingerprints if it wants to win back the confidence of investors. And it needs to find it fast, before investors tune out.
David Parkinson is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow him on Twitter at @parkinsonglobe .
David Parkinson