The justification for Munk’s influence at Barrick wanes – by Boyd Erman (Globe and Mail – July 17, 2012)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Barrick Gold Corp. shareholders have a chance to get answers next week to some of the most pressing questions about the ouster of Aaron Regent as chief executive officer, but one key question about the future of the world’s largest gold producer will almost certainly remain.

Barrick releases earnings July 26, and senior management will address its investors for the first time in any depth since the surprise June 6 CEO change that installed Jamie Sokalsky, a long-time company man.

Investors can expect to hear what the company’s new direction is going to be under Mr. Sokalsky, the subtext being that whatever he outlines will be what the Barrick board wanted from Mr. Regent and wasn’t getting. Barrick has started by reviewing all of its projects to maximize returns.

Of course, when you say “the Barrick board,” what most people hear is “Peter Munk,” the charismatic and iconic founder of the company. Mr. Munk casts a huge shadow over the Toronto-based mining company, and wields a lot of power as Barrick’s co-chairman. Mr. Regent would still be there if Mr. Munk was happy with him. But he was growing impatient with a lagging share price, so Mr. Regent had to go.

The question that lingers, and grows more pressing with each passing year for Barrick, is how much Munk influence is appropriate at Barrick. Yes, Peter Munk founded the company. He was there on top as Barrick grew from a startup producer to the largest anywhere. He is a repository of knowledge and history. But over the years, as Barrick issued more and more shares, his ownership has been diluted.

Mr. Munk now owns a scant 0.17 per cent of the company, or about 1.7 million of Barrick’s roughly 1 billion shares outstanding. He also has another 600,000 options and almost 80,000 restricted share units, which are not enough to move the needle.

Mr. Munk’s son Anthony owns 5,000 common shares and 21,400 deferred share units, according to the company’s most recent information circular. That’s so little it’s not worth calculating the percentage, and yet Anthony Munk sits on the Barrick board, giving the family two of 14 seats.

With a family ownership of less than 0.2 per cent, does it make sense for two Munks to be on the board at Barrick? When the elder Munk leaves the board one day, should any remaining family ties remain? The fact is, it’s not a Munk family company, and it never will be given the widely held ownership structure and market capitalization of more than $35-billion.

For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/the-justification-for-munks-influence-at-barrick-wanes/article4420918/