By Paul Hodgson – CCO and Senior Research Associate
In a Reuters’ report on Friday, details of shareholder opposition to the Glencore takeover of mining company Xstrata were given. The report mentions two of the firm’s largest shareholders – Standard life and Fidelity – indicating that they would vote against the merger not simply because they felt that Glencore was underbidding for the firm, but also because excessive retention payments were being offered to the CEO and other executives to keep them working at the company after the merger.
These golden handcuffs were criticized for not having any performance conditions attached to them, merely being paid out over time.
This is how the other half lives.
The retention deal spans three years – three times as long as any typical US retention deal – and yes, it has not performance requirements, just the same as every US retention payment. The mere fact that two major shareholders mention the lack of performance conditions indicates that in the majority of cases such conditions are attached to retention awards in the UK, putting compensation practice streets ahead of the typical US approach. No wonder my bemused and repeated calls for performance conditions to be applied to retention, or for that matter any kind of, deals following a merger keep falling on deaf ears… what do you mean, we need to prove the merger was good for shareholders before we reward the executives responsible…?