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Shareholder advisory groups Glass Lewis and Institutional Shareholder Services (ISS) have urged shareholders to reject the remuneration package proposed at Glencore’s 2021 AGM for Gary Nagle, who is expected to take the reins from CEO Ivan Glasenberg in July.
Glasenberg, who has been CEO of Glencore for 19 years, holds a significant interest in Glencore of 9%, making him one of the company’s largest shareholders. As such, he waived his participation in any salary increase and incentive schemes, which the remuneration committee described as ‘not typical or competitive’. The committee stated in its annual report that that arrangements for the new CEO would therefore needed to be ‘newly created’ rather than based on these prior arrangements, to ensure a pay package which is both ‘competitive and aligned with our shareholders’ interests’.
Nagle’s remuneration package consists of a base salary of $1.9m (£1.4m) including pensions and benefits, compared to Glasenberg’s base rate of $1.5m (£1.1m). When combined with the incentive plans, including the newly introduced restrictive share plan (RSP), and a 250% annual bonus opportunity (an increase from the previous 200% maximum bonus policy), Nagle’s salary could be as high as $10.4m (£7.5m). However, the report stated that ‘the maximum total annual remuneration that the CEO will actually receive during his employment is c. $6.4m (£4.6m) compared to the peer maximum of $11-18m (£7.9-12.9), since 40% is held back until two years post-employment’. Furthermore, the annual report highlights that 60% of the reward would be in shares. The committee therefore state that this aligns the interest of the executive committee and shareholders, highlighting how long-term share ownership is promoted by the UK Corporate Governance Code. The committee also emphasised that the package was based on benchmarking against its FTSE 30 competitors, including, Anglo American, BHP, BP, Rio Tinto and Shell, and that the ‘proposed remuneration package was developed and consulted upon with a significant number of shareholders and proxy advisors’.
Despite this, Glass Lewis and ISS have urged shareholders to reject the remuneration policy and RSP. Glass Lewis stated that the package was ‘excessive for a newly appointed CEO with no previous experience running a publicly listed company’. ISS echoed this sentiment, highlighting that the RSP meant a large portion of the package was ‘non-performance related’ and further stating the pay was ‘high relative to peers’ despite Glencore claiming it was based on benchmarking against its competitors. Notably, the Investment Association (IA) stated within its principles of remuneration that, when setting base salary, these decisions should not be based solely on comparisons against peer companies, as ‘the constant chasing of the median has been a major contributor to the spiralling levels of pay’. The IA have issued a red top warning over the policy.
The remuneration policy is not the only thing that came under fire, with Glass Lewis also calling on shareholders to reject Glencore’s proposed resolution ‘Climate Action Transition Plan’. Glencore’s climate strategy, as announced in December 2020, sets out plans to become a net-zero emissions company by 2050, in line with the Paris Agreement. In line with this, the board intends to put forward a new climate plan every three years, which would subsequently be put forward to a shareholder advisory vote at the AGM, similarly to how voting on remuneration policy works. However, Glass Lewis stated that this would allow the board to delegate its responsibility for setting corporate strategy, as shareholders would be able to direct climate strategy through their votes.
Glencore’s climate strategy announcement follows on from issues that were raised in its last AGM season, where advisory groups including PIRC and The Australasian Centre for Corporate Responsibility urged shareholders to vote against the re-election of non-executive director, Peter Coates, who chairs the health, safety, environment & communities committee, after his controversial views on climate change. This includes stating that the climate change debate had become ‘illogical’. Furthermore, PIRC urged shareholders to vote against the election of chair, Tony Hayward, due to concerns over his track record and tenure. Hayward was CEO of BP during the devasting oil rig explosion in 2010. Glass Lewis, however, supported all resolutions proposed by Glencore in its 2020 AGM, and no resolution proposed received any significant no votes. Both Coates and Hayward remain on the board.
Glencore’s 2021 AGM is expected to be held on 29 April 2021.
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