Investors send Xstrata execs packing at first Glencore Xstrata AGM

VANCOUVER – The merged Glencore Xstrata PLC (GLEN-L) was supposed to bear a board with directors from both predecessor companies, part of the attempt to portray the deal as a merger of equals instead of a takeover of Xstrata.



VANCOUVER – The merged Glencore Xstrata PLC (GLEN-L) was supposed to bear a board with directors from both predecessor companies, part of the attempt to portray the deal as a merger of equals instead of a takeover of Xstrata.

But that was before Xstrata’s management fought with their own shareholders to give themselves large retention bonuses, which helped delay the massive amalgamation.

Now those shareholders have given most of Xstrata’s directors the boot, including chairman John Bond. The revolt left the world’s fourth-largest mining company in the hands of Ivan Glasenberg, Glencore’s long-time CEO and largest shareholder, and Tony Hayward, the director who has ended up interim chairman of the mining major. (Yes, that's the same Hayward who was CEO of BP during the Macondo well disaster that killed 11 workers and spilled 5 million barrels of oil into the Gulf of Mexico.)

In short, Glencore Xstrata’s first annual general meeting turned into a shareholder revolt against excess that ended the career of one of Britain’s most famous public company directors, reignited the career of another of its most infamous, and left a major global mining company largely controlled by Glasenberg.

As part of the deal to merge with Glencore, Xstrata’s board came up with a plan to pay its managers and executives handsomely if they stayed on through the amalgamation.

Retention pay packages are commonplace, but Xstrata seems to have taken it too far: It would have handed £170 million in post-merger retention pay to 73 top executives, another £44 million in "contractual" payments to 27 of those same employees once the deal was complete, and a potential £25.5 million more in shares awarded.

The proposed payments ranked as the highest ever to secure staff during a takeover in Britain, but Bond and his team thought the payments necessary to retain corporate talent through the merger.

The pay package battle contributed to the delay of takeover, which was finally completed in early May after a year of negotiations. Bond had planned to stay on as chairman of Glencore Xstrata until a successor was found, but the day before the enlarged company’s first AGM, it became apparent his exit would be sooner.

In the end, more than 80% of the votes cast at the AGM were in favour of his removal.

Bond started the meeting by acknowledging his imminent ejection. “I will not be re-elected as your chairman,” he said. “Therefore, the right thing for me to do is to pass the chair to Tony Hayward, who is the senior independent director and deputy chairman, and I will do that now.”

Hayward ended up the senior independent director – and therefore the interim chair – because Bond was not the only Glencore Xstrata director to lose out that night. Three other Xstrata directors who had joined the post-merger board also lost their positions at the meeting and a fourth resigned minutes before the AGM.

Glencore Xstrata has a market capitalization of almost $70 billion, stemming primarily from interests in about 35 coal mines in Colombia, Africa, and Australia that produce roughly 10% of global seaborne supplies. The company is also the world’s fourth-largest copper producer and third-largest nickel producer.

His abrupt exile aside, Bond has been one of Britain’s most successful executives. He spent most of his career at HSBC, rising to become CEO and then chairman. In 1999, he was even knighted for his services to banking. In 2006, he transitioned to telecommunications, serving as chairman of Vodafone.

Bond joined Xstrata in 2011, but his tenure as chairman was dominated by the controversial tie-up with Xstrata. The deal went through several rounds of renegotiations before achieving regulatory and shareholder approval in November.

Hayward left BP after the Deepwater Horizon spill, his four years at the helm marred by his handling of the disaster. He soon teamed up with Nathaniel Rothschild to launch Vallares PLC, a shell company that raised $2 billion in an initial public offering in London in 2011. Vallares merged with Genel Energy (GENL-L) to create the largest oil producer in Iraq’s Kurdish region, and Hayward remains CEO of Genel.

Hayward joined the Glencore board in 2011, after the commodities trader debuted on the London and Hong Kong exchanges. He has stated he will not be a candidate for the permanent chairman position, and the company is launching a global search to fill that role.

Glencore Xstrata will also have to search out a new set of directors to fill the seats at its near-empty boardroom table. In the meantime, CEO Glasenberg is positioned firmly in the driver's seat.

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