Shareholders at Xstrata's upcoming annual meeting should vote against the three non-executive directors proposed by Glencore, the Swiss commodities trader, a leading advisory group said yesterday.
Pirc, which advises pension funds on how they should vote at annual meetings, warned that the mining giant's board does not have enough independent voices among its eight non-executive directors.
Glencore's nominees, including its chief executive, Ivan Glasenberg, are not independent as the trading group owns about 34 per cent of the FTSE 100-listed miner, Pirc said. The trader, which wants to raise up to $11bn (£7bn) in a flotation in May, has also nominated Aristotelis Mistakidis and Tor Peterson for Xstrata's board.
The commodities giant is seen as a potential buyer of Xstrata, with Mr Glasenberg recently saying that, though a merger was not on Glencore's agenda at the moment, a combination would create value.
The UK's Corporate Governance Code recommends that more than half of a board should be made up of independent non-executive directors.
Pirc also questioned the independence of the non-executive director Sir Steve Robson, who retired as second permanent secretary at the Treasury in 2001, and David Rough, who used to be a director at the insurance group Legal & General. Both, Pirc said, had been on the mining group's board of directors "for more than nine years".
"There is insufficient independent representation on the board," Pirc said in an alert ahead of the miner's annual meeting on 4 May. "We therefore recommend that shareholders oppose the election of all five directors."
For its part, Xstrata stuck by Sir Steve and Mr Rough, saying it had considered their independence in line with the code.
It also said that, in line with its articles of association, its 11-strong board had a majority of independent directors, and "subject to the election of all nominees will continue to do so following the AGM in May".
Glencore, which last week outlined details of new directors alongside its listing plans, currently has two nominees on the Xstrata board: Mr Glasenberg, who was appointed in 2002, and Willy Strothotte, who is due to step down as non-executive chairman at the upcoming annual meeting.
Mr Strothotte is also Glencore's chairman, but is set to be replaced by Simon Murray when Glencore is listed. Xstrata has moved to distance itself from Glencore, naming Sir John Bond, the former chief executive and chairman of HSBC, as Mr Strothotte's replacement in March, before Glencore confirmed its intention to list.
Under a longstanding deal between the two companies, Glencore is able to nominate up to three directors.
Pirc also weighed in on Xstrata's remuneration policies, which it labelled "excessive" and said investors should oppose the remuneration report. "Combined remuneration was excessive in the year under review with, for example, an annual bonus paid to the chief executive [Mick Davis] amounting to 300 per cent of base salary," Pirc said. "In addition, he received an award of 300 per cent of base salary under the L-tip [long term incentive plan]," Pirc added.Reuse content