Important highlights from upcoming meetings, provided by Glass Lewis’ global research team

It’s only November, but Christmas appears to have come early for certain Australian executives. This week’s PSI looks at two companies that are asking shareholders to approve notable equity grants:

Resolute Mining Limited  Australian Securities Exchange  November 21

The remuneration committee of Resolute Mining is living up to the company’s name. At the AGM in May, shareholder opposition prompted the withdrawal of a proposed A$3.4 million special LTI award that had been intended for MD/CEO John Welborn. Undeterred, the company is holding a special meeting on November 21 to consider the 3 million-share grant for a second time.

The special LTI award is split into three annual tranches, vesting 2.5, 3.5 and 4.5 years after grant subject to a mix of absolute TSR growth targets and strategic objectives tied to the company’s Strategic Plan and Life-of-Mine budgets. Notably, the grant would not replace Mr. Welborn’s standard LTI award, under which he receives up to 100% of fixed remuneration annually, subject to achievement of relative TSR and operational growth targets.

Back when the original award was rejected by proxy voters prior to the AGM, chair Martin Botha advised that the board intended to consult with shareholders to understand concerns and ensure that the remuneration strategy was clearly communicated. Following that review process, the structure of the award has been altered to include a relative TSR gateway as a safeguard on the absolute TSR component, and the company has provided additional supporting disclosure for the grant, highlighting “the significant differences” between the company’s operations and those of Australian peers, specifically “remote and challenging international jurisdictions” that “require additional skills and commitments”.

Clinuvel Pharmaceuticals Limited Australian Securities Exchange November 20

Despite the drama (and expense) of calling a special meeting to reconsider an award that shareholders had previously rejected, on a quantum basis the events at Resolute amount to a molehill – at least compared to the mountain of equity that Clinuvel intends to grant its MD/CEO, Philipe Wolgan, as part of a major shakeup to the company’s remuneration arrangements.

Starting at the top, Mr. Wolgan’s new package includes a significant increase in fixed pay, a reduced short-term cash incentive, a loyalty/retention cash payment – and over A$46 million in equity. In most circumstances, the combination of a significant increase in fixed remuneration and a non-performance-based loyalty award would be enough to raise questions. In this case, the company has provided a detailed rationale for the uplift (which is offset by a reduction in STI opportunity), and with regard to the loyalty award – well, getting an extra A$270,000 cash (A$7,500 for every month of employment) is certainly notable, but it somewhat pales in comparison to A$46 million in equity.

About that grant…. It’s quite large. If approved, Mr. Wolgan would receive up to 1.5 million shares (diluting existing holders by up to 3%) subject to a total of eight performance conditions, which relate to market capitalisation, financial performance, achievement of strategic milestones, and the board’s discretionary assessment. Much like the increase to the MD/CEO’s fixed remuneration, the award is accompanied by a fulsome rationale – including the corresponding shuttering of the Business Generation Incentive, which offers cash awards of up to A$500k for strategic milestones.

Looking beyond the MD/CEO, the company’s shift away from cash incentives towards equity-based awards will also impact other executives. Further, unlike in past years, non-executive directors will no longer receive equity grants. That’s a move that brings the remuneration (and governance) structure closer in line with best practice; whether it’s enough to convince shareholders to ignore A$46 million in equity (and a non-performance-based loyalty payment) remains to be seen.