Executive pay packages are complicated. It’s important to pay for top talent, while keeping shareholders happy.And striking the right balance is at the root of the potential $90 billion merger between commodities giant Glencore and miner Xstrata. BlackRock and other large investors says the $200 million plus in payments to retain key Xstrata executives is excessive.
This pay debate is particularly difficult because Xstrata’s executives have a great deal of leverage. For the merger to be successful, the businesses need to be combined as quickly and seamlessly as possible — and that requires executives familiar with Xstrata’s mining operations. They’ll want top dollar to stay on.
Instead of making the case that the packages are necessary to its investors, Xstrata’s board has taken the unusual step of splitting the decision, allowing investors to vote separately on compensation and the deal as a whole.
That’s almost unheard of for a merger this size, and highlights how frustrated board members are with a deal that was originally announced in February.
Executive pay is a hot-button issue, but it’s an unavoidable one in a situation like this. Because the company waited until they were pushed against their Monday deadline, and made a decision under pressure from investors and investment bankers that want a payday, Xstrata’s board may end up in control of an enormous mining conglomerate without the people needed to lead it.
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