Two mining companies reprimanded for their governance

The last few months have seen governance mea culpas at Champion Iron, owner of the Bloom Lake mining complex near Fermont, as well as at Agnico Eagle, operator of the Canadian Malartic gold mine (Abitibi-Témiscamingue).

These two mining companies found themselves in a less than stellar track record last year. How? By being rebuked by their shareholders at their respective annual meetings. After seeing their compensation approaches rejected by a large majority of voters, both companies had to go back to the drawing board to correct course.

“The moral of the story is that we need to be more active as investors,” Leblanc said.

Even though these votes on compensation practices are advisory, and therefore not binding, arousing the ire of its shareholders tarnishes a company’s reputation. In the case of Champion, of which the Quebec government is the largest shareholder, the work does not seem to be quite finished (see other text).

Bonus stories

It was stories of bonuses and special payments that sparked a shareholder revolt at Champion Iron and Agnico Eagle.

A 62% drop in profits in 2022 did not stop the board of directors of the iron ore mine operator Bloom Lake to use its discretion to make changes that have boosted its executives’ bonuses.

The parent company of Quebec Iron Ore (QFO) had also loaned $9 million to its executive chairman Michael O’Keefe in addition to offering a one-time bonus of $750,000 to its CEO (David Cataford).

On the Agnico Eagle side, it was payments to reward the bosses after its union with Kirkland Lake Gold – a marriage worth more than 13 billion – that sparked a revolt. Sean Boyd, who was chairman of the board and head of the mining company, was notably able to pocket a bonus of 10 million, while his successor, Ammar Al-Joundi, received 2.2 million. Added to this was the payment of a severance payment of more than 15 million to another executive of the mining company.

The result of these decisions? The policies of Champion and Agnico Eagle suffered stinging setbacks, with rejections of 54% and 75% respectively.

“In both cases, it is a strong signal sent by shareholders, who expect corrections to be made,” underlines François Dauphin, director of the Institute for Governance of Public and Private Organizations (IGOPP).

In a sign that these are exceptional cases, compensation policies garner about 91.5% support in Canada, according to estimates by Hugessen Consulting, a governance consultancy.

“There should be more [de rejets] during these votes, Mr. Leblanc believes. These two examples show that it is important to make yourself heard and to take the matter seriously.”

Calm down the game

Agnico Eagle and Champion had to make their mea culpa.

In the case of the gold miner, it has pledged to end “one-off bonuses” to its bosses and has split the positions of chairman of the board and chief executive officer.

Apparently, that was enough to turn the page on the Agnico Eagle controversy, as its compensation approach was approved by 96%.

In both cases, it was not just a matter of announcing changes. For example, the most recent solicitation circular sent to Champion shareholders devotes at least three pages to the work done over the past year.

For example, the mining company says it has contacted more than “100 shareholders,” including “asset managers, brokers and individuals” who together hold more than “70% of the company’s outstanding shares.”

As a result, its board will stop using its discretionary power to allow cash bonuses to be paid except in “exceptional circumstances.” It also promises to ease up on single-person bonuses, as was the case with Mr. Cataford.

The changes did not prevent overall compensation – which includes base salary, bonuses and other items such as stock options – from rising about 45 percent last year to $14 million.

The increase, however, comes in a context where the operator of the Bloom Lake complex was able to restore some luster to its net profits, which rose by 17% to 234 million.

A sign that Champion shareholders do not seem unanimous on the issue of governance, only 68% were convinced by the changes made on the issue of salaries at the annual meeting on August 28.

“This is close to the rates obtained in the years prior to last year, which shows that a certain dissatisfaction remains,” says Mr. Dauphin, for whom the support rate of 68% is considered “very low.”

In his view, this means that the company will have to “keep the discussion open with shareholders.”