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Anglo American is to make sweeping changes to its remuneration policy, capping the amount its chief executive Mark Cutifani can receive from shares awards granted at the depth of the commodity price crash.
In its annual report, published on Monday, Anglo said it would put a limit the number of shares Mr Cutifani would receive from its 2014, 2015, and 2106 long term incentive programmes.
This will be limited to the face value of the awards at the time they were granted. For Mr Cutifani, that means the limit is set at £13.1m. Any awards above that level will be forfeit before the start of the two-year holding period, Anglo said.
“We are confident that we have created a remuneration policy that balances the needs and expectations of management and shareholders”, said Sir Philip Hampton, chairman of Anglo’s remuneration committee
Large Anglo shareholders have criticised the large number of shares that Mr Cutifani and other executives were granted as part of a long-term incentive plan.
Last year, more than 40 per cent of the proxy votes at Anglo’s annual shareholder meeting in London were cast against the miner’s annual pay report. It was the latest in a spate of protests against excessive rewards for the people who run big UK companies.
Anglo’s share award is calculated by dividing executives’ salary by the share price. When Anglo’s stock price was on its knees a year ago, Mr Cutifani was reckoned to have been granted almost 1m shares – almost three times as many as he received a year earlier. Since then shares in Anglo have surged, rising from around 500p to more than 1,200p. This had the potential to deliver windfall gains when the shares vested after three years.
Going forward, Anglo will reduce the maximum amount of shares that can be awarded to its chief executive from 350 per cent of salary to 300 per cent. A cap on awards will also be introduced.
“From 2017 onwards, the value of LTIP awards at the time of vesting, using the share price at the time, will be limited to twice the face value of the award at grant; in exceptional circumstances amounts earned above twice the face value of the award may be deferred at the discretion of the committee,” the annual report said.
Shareholders asked to vote on the changes to remuneration report at Anglo’s annual general meeting at the end of April.
Mr Hampton said Anglo has taken into account the feedback received from some shareholders in advance of the 2016 AGM, as well as the relatively low level of support received for the 2015 remuneration report.
“In particular, we were determined to address investors’ concerns about the potential windfall gains for executive directors arising as a result of the volatility of the Company’s share price and the mining industry more generally,” said Mr Hampton.
Mr Cutifani’s pay for 2016 totalled £4m, up from £3.46m. He received a basic salary of £1.26m as well as cash bonus of £2.3m.
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