What price loyalty? Well, in the case of Xstrata chief executive Mick Davis it works out at around £26,300 per day. Another shareholder rebellion is in the offing as the formal merger documents for the Glencore/Xstrata tie-up revealed proposals to pay out around £173m to Mr Davis and 72 fellow executives at the Anglo-Swiss miner simply for staying in their jobs for at least another two years. Nice work if you can get it.
Admittedly, the £28.8m in "retention awards" for Mr Davis does tie him in for an additional year, although it's not linked to performance - a particular bugbear for City fund managers in the current climate. The proposed sum will approximate his standard remuneration package over the same period - and that’s before any long term incentives come his way.
There's no doubt that the Xstrata chief executive is highly regarded within the industry, but two out of five shareholders voted against the mining group's remuneration report at its annual meeting last month. On 12 July, Xstrata shareholders will be given a vote on pay, in addition to a separate one covering the Scheme of Arrangement itself - but the resolutions are inter-conditional and the merger will not be implemented if the retention payments resolution is not approved. Ironically, BHP and Billiton pulled a similar fast one when they merged a decade ago - and the finance director of Billiton at the time was one Mick Davis.
Some of Xstrata's institutional shareholders have already signaled their support for the merger, but there are others who believe that the deal undervalues their company, especially given the merger documents confirmed that the share swap ratio for the deal remains unchanged. And because the merger is being pursued through a Scheme of Arrangement, Glencore cannot bring to bear its 34.6 per cent holding, meaning that only 16.5 per cent of Xstrata's investors need vote against the merger to see it fail.
