James Moore: Qataris are right to stand back from voting for these Xstrata retention deals

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The Independent Online

Outlook Thanks to the Qataris, Glencore boss Ivan Glasenberg's protracted quest to win control of Xstrata is now all but over. The oil-rich state's sovereign wealth fund will likely carry the day for him because, even though the structure of this mining mega-merger means that only 16 per cent of Xstrata shareholders saying "no" could kill it, there isn't enough stomach among the rest to torpedo it now the big dog is laying at Mr Glasenberg's feet.

At Mr Glasenberg's feet, but not at Xstrata's. There's a sting in this dog's tail.

Here's why. It has repeatedly been said that the benefits of this deal to Xstrata's shareholders are debatable. With an enviable portfolio of assets in excellent situations, Xstrata isn't short of prospects or profits ($8.15bn (£5.13bn) pre-tax last year).

Despite this, there is no argument whatsoever about the benefits of the deal to Xstrata's managers. The top 70 stand to divvy up £140m for doing little more than staying in their jobs as a result of the retention packages agreed by Xstrata's bosses.

But with the deal under threat, Xstrata has been forced to offer shareholders a bonus too in the form of a vote on the bonuses for its management. The Qataris sprang a surprise by abstaining.

Make no mistake, this is a real snub to Xstrata's chairman, Sir John Bond, and his fellow directors. With most of the voting advisory services urging shareholders to go one step further and vote it down, the retention packages may now fall away.

We shouldn't cheer too loudly. The statement issued by Qatar Holding explaining its decision rather misses the point. The investor said it was "conscious of the sensitivities concerning governance issues in the UK and does not feel it appropriate to influence the outcome either way".

However, it nonetheless affirmed that it "strongly believes that retaining Xstrata's operational management is of critical importance to the successful and stable integration of the two companies, the completion of key projects within agreed timescales and to maximising the benefits of the merger".

Which ignores the fact that retention packages are illogical and bad for business. If a rival wants one of the men or women whom Xstrata says are so valuable, standard practice is to simply buy out their retention deal so they don't lose out by changing employer. And then hand them a fresh retention package (which may in turn be bought out by another employer).

Still, if the Qataris' abstention leads to the packages being voted down it will be a victory of sorts for the governance lobby. And thus (in the long term) it will be a victory for investors who will ultimately benefit from companies that are run better. The Qataris included.