A look at compensation for mining execs, boards

The following is a summary of the Mining Industry 2012 Executive and Board Remuneration report, conducted Bedford Consulting Group and Global Governance Advisors. The report covers remuneration practices among more than 230 mining organizations including major international companies, Canadian mid-tier firms and juniors. The data collected were released in 2012 and reflect 2011 market practice. To buy the full report, contact Karin Buckland at kbuckland@bedfordgroup.com.

This year we have noticed an increased reluctance on the part of talented executives to take on board roles, considering the remuneration, responsibilities and time commitments required. With “C-suite” mandates, we are challenged by the short supply of experienced executive leaders for key roles, and a trend for executives to rebalance their workload and lifestyle without considering new opportunities.

Board remuneration

• Annual retainers paid to board members increased modestly year-over-year by 2% to 3% across the mining industry.

• For companies with assets under $1 billion, 156 (87%) granted options to directors and 18 (10%) granted phantom shares, either deferred share units (DSUs) or restricted share units (RSUs).

• For companies with assets over $1 billion, only eight (15%) granted options to directors, but 29 (55%) granted phantom shares.

• 76% of companies provided share-related grants (options or phantom shares) to directors this year, compared to 67% last year.

• An increase from 71% to 77% of companies paying an additional retainer to the audit committee chair. Audit committee chairs receive a retainer that is 130% of that paid for board membership. This difference is notably consistent across the mining industry, regardless of company size.

• An increase from 63% to 71% of companies paying an additional retainer to the human resources and compensation committee chair. Human resources and compensation committee chairs receive a retainer that’s 115% of that paid for board membership, with similar consistency across the mining industry.

• Fifty four (23%) of the 233 companies require board members to accumulate shares in their company. The ownership position typically must be achieved within a five-year period following appointment to the board, and is typically expressed as a multiple of the annual board retainer.

Executive compensation

• Average salary increases received by CEOs who were included in our analysis last year and continue to be employed by the same company this year varied by asset class. The results were as follows: companies with assets less than $100 million saw increases of 3%; companies with assets between $100 million and $5 billion saw increases from 8% to 15%; and companies with assets over $5 billion saw increases of less than 5%.

• The analyzed data reflect board decisions made in late 2010 and early 2011, not the most recent set of salary adjustment decisions made by boards at the end of 2011 and implemented in 2012. We expect that current economic conditions in the mining industry will constrain 2012–2013 salary adjustments.

• Of the 166 CEOs of companies with assets under $1 billion, 132 (80%) received a grant of stock options and 23 (13%) granted phantom or restricted shares (either DSUs or RSUs).

• Conversely, of the 65 CEOs at companies with assets over $1 billion, 44 (67%) received a grant of stock options, but 47 (62%) granted phantom or restricted shares (either DSUs or RSUs) instead of or in addition to options.

• Forty-four companies (19%) require their CEO, within five years of appointment to the role, to accumulate common shares to a typical value of three-times salary.

• The prevalence of options or share grants and share ownership requirements to other executives is substantially similar to the CEO, but share ownership requirements are typically set at a lower value of one- to two-times salary.