Rusal proposes trust to pay Norilsk Nickel independent directors
MOSCOW. March 19 (Interfax) - Aluminum company UC Rusal proposes to set an Independent Directors Trust up to remunerate independent board directors at MMC Norilsk Nickel , Rusal said in an open letter to Norilsk Nickel shareholders, published in the Financial Times and posted on its Facebook page.
Independent directors at Norilsk Nickel have not been paid since June last year, when the annual shareholders meeting, following recommendations by ISS and Glass Lewis, rejected proposals on pay and options for independent directors, even though they had not altered since 2010. Norilsk Nickel held an extraordinary shareholders meeting in February to try and approve the proposals but they were again rejected after shareholders were unable to agree on the criteria for the independence of directors. First, Rusal voted against altering the independence criteria, devised by Interros, then Interros abstained from voting on the pay and a decision was not in the end reached.
Rusal said in the letter that it is prepared to grant the Independent Director Trust $250,000 as remuneration for each independent director plus a further bonus for serving on committees and expenses.
If the AGM approves compensation at the June 2012 AGM, then the Trust will cease to exist as it will have fulfilled its function in remunerating the independent directors for the period June 2011 to June this year. If the proposals are rejected again, the Trust will be prepared to pay the independent directors for the period to the end of June 2013.
Rusal is prepared to finance the trust on its own if it gets no support from other shareholders, a Rusal representative told Interfax.
Norilsk Nickel told Interfax that it considers it advisable ahead of voting to define the independence of directors in keeping with international practice and Russian laws. Norilsk Nickel is studying practice in the field of independence criteria at leading companies and the amount they pay independent directors. The proposals of the corporate governance committee under the board of directors will be ready and submitted for voting at the AGM. "Management at Norilsk Nickel considers it necessary to remunerate independent directors," the company said.
Norilsk Nickel's charter currently defines as independent those directors who represent shareholders holding less than 10% of company shares. Six of the board's 13 members are therefore defined as independent: Lucian Bebchuk, Alexander Voloshin, Enos Banda, Bradford Mills, Claude Dauphin and Farhad Moshiri. Voloshin, Bebchuk and Moshiri back Rusal on the board, while Mills, Banda and Dauphin are considered to be allied with allied with the management of Norilsk Nickel and Interros.
Rusal thinks "competent and active" independent directors will not agree to serve on the Norilsk board at their own expense and that it is "aware of no public company where this is the case."
Rusal is proposing to pay the independent directors the same as the shareholders were asked to consider at the EGM in February. At he EGM, shareholders were asked to approve the same remuneration that was in effect prior to the last AGM: $62,500 quarterly, plus up to 2 million rubles in documented expenses per year, as well as an additional $32,500 quarterly for chairing a board committee, and 20,000 provisional shares. The total annual compensation package would be limited to $1 million per independent director.
Norilsk Nickel's main shareholder is Interros, which prior to a share buyback controlled up to 30% of the mining giant. Rusal, prior to the buyback, held 25.13%, the Dutch trader Trafigura and its associated entities had around 8%, and Alisher Usmanov's iron ore and steel holding OJSC Metalloinvest around 4%. Shareholder stake ratios will change after the results of the buyback are finalized and a possible cancellation of some of the acquired shares.