The proposed £57bn mega-merger between the mining and commodity giants Glencore and Xstrata was dealt a further blow yesterday as a key shareholder body condemned plans to pay key executives £170m just to keep them at the company as part of the deal.
The Association of British Insurers made its contempt known by issuing a rare "red top" alert on the so-called retention payments, which would see Xstrata chief executive Mick Davis, pictured, receive £29m for running the combined group for three years once the deal is finalised, irrespective of its performance. The red top represents ABI's highest level of concern about an issue concerning the shareholders it represents.
Andrew Ninian, head of corporate governance at ABI said: "The ABI is always sceptical about the effectiveness of retention payments. In this case we have raised further concerns around the significant retention bonus being offered to Xstrata executives which are not linked in any way to performance."
Ninian said the ABI had "no opinion" on whether shareholders should vote the deal through, although Xstrata and Glencore have said the deal is contingent on the retention packages being approved.
The companies say Xstrata's top 73 managers are so important they should be collectively be paid £170m to stay at the group for two years – with the exception of Davis, who must stay for three. An Xstrata spokesman said: "Retaining a stable management team is in the interests of Xstrata shareholders."
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