LONDON—Anglo American PLC shareholders voted in large numbers
against a lucrative pay package for the company's chief executive,
Mark Cutifani, a sign of growing dismay with commodities giants
whose shares have suffered in the past year amid a rout in
prices.
The vote signaled some investor disappointment with Mr.
Cutifani's performance as he embarks on a restructuring plan in
which the century-old mining company plans to cut tens of thousands
jobs and reduce the number of mines it runs to 16 from 45.
Following Anglo's annual meeting Thursday in London, the company
said 42% of the votes cast were against its executive-compensation
plan, which included a decision to pay Mr. Cutifani £ 3.4 million
($4.9 million). The CEO's total pay, which includes a £ 966,000
bonus, was 8% lower than a year ago.
Anglo reported a $5.6 billion net loss in 2015, following a loss
of $2.5 billion the previous year. Anglo's shares tumbled about 70%
in 2015, making it the worst performer on the U.K.'s blue-chip FTSE
100 index.
Thursday's vote follows last week's rejection by BP PLC's
shareholders of the company's executive-pay policy, a stinging
rebuke to the oil titan's chief executive, Bob Dudley, and his
board. The oil giant said 59% of shareholder votes were against the
company's compensation decisions for 2015. The plan included a
roughly 20% increase for Mr. Dudley's total pay for the year, when
BP lost $5.2 billion.
Shareholders at Smith & Nephew PLC, a U.K. medical-device
maker, last week voted down the company's executive-pay plan, which
included $3 million in bonus payments to its top 60 executives
despite shares lagging behind the median of its peer group.
Other U.K. companies facing tense shareholder pay votes include
Reckitt Benckiser Group PLC, the maker of Durex condoms and
Strepsil lozenges, which is proposing a steep increase in the
compensation for CEO Rakesh Kapoor.
"RB pays for performance, and management only win if
shareholders win—which they have," a Reckitt Benckiser spokesman
said. "We are pleased that our remuneration policy and report has
repeatedly been approved by investors at our [annual general
meeting] and won support from major shareholders." Institutional
Shareholder Services, an investor advisory group, recommends that
shareholders approve the RB compensation package. The company's
shares are up nearly 9% this year.
Mounting investor revolts against executive-pay awards in the
U.K. reflect previous bursts of shareholder wrath. In 2009,
investors shot down pay-package proposals at Royal Bank of Scotland
Group PLC and Royal Dutch Shell PLC. Shareholders in 2012 rejected
a 60% pay raise granted to the CEO of WPP PLC, the world's biggest
advertising agency by sales. That same year, investors rejected a
board-recommended package of payments to top executives at Xstrata
PLC, a mining giant that was in the process of negotiating a merger
deal with Glencore PLC.
Shareholder votes on executive pay aren't binding in the U.K.,
but the protests can send a strong signal to board members and
management.
Mr. Cutifani, who took over the helm of Anglo in 2013 with a
promise to turn around the company's sagging fortunes, is well
aware his performance is under a microscope. A global rout in
commodity prices and a middling portfolio of high-cost assets have
thwarted his efforts.
"The pressure is on management, and if they don't act there will
be consequences," Mr. Cutifani said in February after announcing
deep losses for 2015.
Investor ire at Anglo focused on a decision to award Mr.
Cutifani shares worth 3½ times his salary, the maximum amount
allowed, as part of its long-term incentive plan. Because Anglo's
share price has fallen so steeply, that means Mr. Cutifani was
awarded far more shares for 2016, 993,810, than in previous years,
according to ISS. With the award, he stands to pocket a windfall if
the company's shares rebound significantly.
Mr. Cutifani also benefited from a shift in how Anglo calculates
return on capital employed over a three-year period. Anglo this
year lowered the return-on-capital threshold, averaged over several
years, required for achieving a bonus to 5% from last year's limit
of 10%. That effectively makes it easier for Anglo executives to
earn bonuses. When Mr. Cutifani joined Anglo, he said a 15% return
on capital was the minimum performance a mining company should
achieve.
The company said slumping commodities prices have effectively
shifted the goal posts.
The vote followed a recommendation by advisory firm ISS that
investors reject the pay package. ISS, in a March 31 report,
complained that the award of nearly one million shares to Mr.
Cutifani came despite a steep loss of shareholder value. Its
declining share price "has meant that Anglo American is no longer
one of the 30 biggest companies in the FTSE 100," ISS said.
Anglo has frozen executive salaries for 2016, though bonus
awards are subject to change.
The company's shares, along with those of a raft of other miners
whose shares plunged in 2015, have surged back this year as
commodity prices stabilized, gaining nearly 150% year-to-date.
Earlier Thursday, Anglo reaffirmed its 2016 output guidance as
lower production in diamonds, coal exports and iron ore in the
first quarter was offset by higher platinum and nickel production,
compared with a year ago.
Saabira Chaudhuri contributed to this article.
Write to Scott Patterson at scott.patterson@wsj.com
(END) Dow Jones Newswires
April 21, 2016 14:05 ET (18:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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