The trouble with equity-based pay and the elusive quest for a remedy

Ed Waitzer - in the News

The trouble with equity-based pay and the elusive quest for a remedy

Janet McFarland & Tim Kiladze  /  Globe Advisor / Published

In the escalating war over executive pay, a remote gold mine in northern Quebec was thrust into an unlikely role. The Malartic project, 27 kilometres west of Val-d’Or, is one of the best deposits in the country and it was bought last year for nearly $4-billion.

For wrestling such a precious project from a giant rival, Yamana Gold Corp. paid its chief executive officer and three other executives handsomely. Peter Marrone, the CEO, got a special $2.7-million cash bonus when the deal closed, as well as 450,000 share units that would make him far richer if the mine performed well. Three other officers received $1.2-million combined.

A firestorm erupted when the pay packages were made public by Yamana last spring. The sizable cash portions divorced the bonuses from long-term performance – Yamana’s shares have lost two-thirds of their value since the takeover was first announced – and executives at Yamana’s takeover partner, Agnico-Eagle Mines Ltd., didn’t earn an extra dime for the same deal.

Canadian shareholders are famously reluctant to voice frustrations, but 63 per cent of Yamana’s investors expressed disapproval by voting against the compensation practices at the company’s annual general meeting in April. They weren’t alone. Canadian Imperial Bank of Commerce and Barrick Gold Corp. also lost similar say-on-pay votes this spring, making 2015 the first year three major Canadian companies faced a firm rebuke from shareholders on pay.

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