Glencore Chief Defends High Executive Pay
Ivan Glasenberg, chief executive of Glencore, has launched a provocative defence of high pay for executives, arguing that substantial remuneration is required to secure entrepreneurial leaders.
His comments echo those of Sir Martin Sorrell, the embattled head of WPP, who this week argued in favour of competitive pay, and come after a series of pay-related rebellions against UK chief executives.
However, Mr Glasenberg stopped short of explicitly backing the proposed £29m windfall to Mick Davis, chief executive of miner Xstrata, to keep him as boss of the combined Glencore-Xstrata following their proposed merger.
Mr Glasenberg told the Melbourne Mining Club dinner in London on Thursday night: “If you want a good CEO, you have to pay for it.”
He added that London-based shareholders needed to decide whether they wanted a low paid “caretaker manager” or a highly rewarded entrepreneur, who behaved like an owner of the company.
Investors baulked last week when Xstrata said Mr Davis would be paid £29m over three years, without any performance thresholds, to stay and run the combined company.
Mr Glasenberg said that the chairman and independent non-executives of Xstrata had determined it was important to retain management as part of the deal. When asked whether the payment to the South African Mr Davis should be performance based, he said: “It’s not up to me; it’s up to the board of Xstrata”.
Sir John Bond, Xstrata’s chairman, said in a letter to shareholders last week that reaping the full benefits of combining with Glencore, the world’s biggest commodities trader, was “dependent upon the retention of key Xstrata personnel”.
However, Fidelity, the fund manager, called the merger payments “provocative and insensitive”, while Standard Life labelled them “unacceptable and depressing”.
Mr Glasenberg later acknowledged that Mr Davis’s windfall was a “new factor” to convince sceptical supporters to back the deal. “Yes, they [Xstrata shareholders] are not happy,” he told the Financial Times on the sidelines of the dinner.
The proposed payout, announced last week, would total £217m to 73 senior Xstrata employees, including Mr Davis. The pay arrangements will be voted on at a shareholder meeting in July and without investor approval of the remuneration plans the $70bn merger will not proceed.
Mr Glasenberg also said that the deal with Xstrata would not have happened had he not been willing to step back from the CEO role.
“I don’t need the CEO job because I am a shareholder and I don’t need the title,” he said, referring to the two companies’ belief in the strength of the future business together.
Xstrata was not immediately available for comment.