18 February 2005
Johannesburg – If Harmony's bid for
Gold Fields were to succeed, Harmony would be duty-bound to honour the
golden parachutes of at least three Gold Fields executives, which could
cost it up to R30 million.
A golden parachute, permissible by law, is a prearranged
contract whereby an executive is promised a large payout if there is a
change of control at the company.
Golden parachutes are used to retain staff but are also a well-known corporate defence tactic.
the payments were to be particularly onerous, shareholders might not
want to go ahead with the change of control in the first place.
Holland, the chief financial officer of Gold Fields and one of the
directors with a golden parachute, said the arrangements had been in
place for three or four years.
He said they were not
introduced in response to rumours of a takeover offer from Barrick, the
US-based gold mining company. But there were amendments ahead of the
"They are a normal practice … and are commonly
used in North America," Holland said, referring to the fact that Gold
Fields is listed on the New York Stock Exchange.
He said in some instances golden parachutes were triggered even when executives did not lose lose their jobs.
"In our case, it might not be triggered if we didn't lose our jobs [but there was a change in control]."
Ferdi Dippenaar, Harmony's marketing director, said the company was aware of the contracts.
fact that Harmony does not have golden parachutes shows how we feel
about them," Dippenaar said, "They are not against the law, but they
are not the right thing to do."
The main parties to the golden parachutes are Holland and chief executive Ian Cockerill.
senior officers are provided for, but the only one mentioned in
official documentation is Craig Nelson, the executive vice-president of
Although the contracts are complex, these executives would, in brief, be paid twice their salaries if Harmony's bid succeeded.
the past year, Cockerill's total package amounted to over R6 million
and Holland's topped R3 million. Nelson's details were not disclosed.
addition, the directors have been authorised to exercise any
outstanding share options up to two years after the change in control.
Thirty days is the usual limit.
Cockerill is not the most highly
paid mining boss in South Africa. Harmony's chief executive, Bernard
Swanepoel, earned over R12 million in fiscal 2003, with gains from
options added to his package, and Bobby Godsell, chief executive of
AngloGold, earned R8.65 million last year.
Dippenaar felt that
if a golden parachute was sizeable, a board should ask for shareholder
approval so as not to prejudice investors in the event of a takeover
offer, "but I don't think the Gold Fields board went to shareholders in
Holland said golden parachutes were typically a compensation committee issue.
a group of non-executive directors decide on whether or not to
recommend them to the board and the board then votes on the issue. It
is a transparent process."