As the notorious magnate leaves Barrick Gold, Peter C. Newman contemplates his rise, fall, and what’s next
With Peter Munk about to abandon his chairmanship of the Barrick mining empire at next week’s annual meeting in Toronto, it seems only appropriate to dwell on his fall from grace. From being the invincible king of international gold mining, the pride of Canada’s business tycoonery, the talented Mr. Munk finds himself accused of having moved too far, too fast, at too high a cost—¬leaving his company stuck with a tricky salvage operation.
But that is not the guts of the story, not the sum total of this remarkable mega-entrepreneur’s long journey from his aristocratic Hungarian background to at least three excursions into commercial glory. That sequence of initiatives climaxed in his successful run as the world’s champion gold magnate, who until the past three years could do no wrong. The dramatic reversal of his standing on Bay Street brought into play British explorer George Leigh Mallory’s 1924 comment about Mount Everest. When asked why he risked his life climbing the mountain, he famously replied: “Because it’s there.” Sixty-four years later, on Sept. 29, 1988, when Stacy Allison became the first American woman to conquer the great peak, was asked the same question, she smiled and shot back: “Cause I’m here!”
That’s the essence of Peter Munk, explained in three words: ¬the optimistic, fast-action guy, convinced that everything he touched would turn to gold. For most of the past five decades that was pretty well what happened. His company was flying high and he dominated its annual shareholders’ meetings, rhetorically armed to meet any challenge. It was at these public performances that he shifted into high gear, using messianic hand gestures and commanding body language. Inevitably, he won over his audiences.
At this AGM, it will be much tougher. For three years Barrick’s share value has been falling. The company has been selling off assets and taken more than $15 billion in writedowns since 2012, including the disastrous acquisition of a copper company that Barrick borrowed $6 billion to buy in 2011. (To shore up its debt-laden balance sheet it raised $3 billion in equity last year.) The Munk magic was history. His golden presence can no longer afford to float above the fray.
Worst of all, Munk, who turned 86 in November, abandoned his essential power base of loyal shareholders by initially ignoring their insistence that he reduce the outrageous compensation paid his directors and executives. Some more realistic payouts are now being contemplated, but the signing bonus of $11.9 million for John Thornton, Munk’s chosen successor as chairman, remains in place, as does the newcomer’s 2013 haul of another $9.5 million. It follows a pattern: former Barrick CEO Aaron Regent, who collected an $11-million signing bonus in 2009, got a $12-million reward for being fired three years later. (That somehow seemed out of balance; he was paid more to leave than to arrive.)
An internal blitzkrieg followed. At last year’s annual meeting in April, investors controlling an astonishing 85 per cent of Barrick’s shares rose up in protest by voting against the company’s approach to executive compensation. It was a serious, unprecedented condemnation of Munk’s management style, and it followed a 66 per cent plunge in Barrick’s share price since 2011. The shareholders had spoken. At the same time, seven of Canada’s leading pension funds strongly and publicly criticized the levels of Barrick’s executive payouts, protesting that they were “inconsistent with the governance principles of pay-per-performance” while setting “a troubling precedent in Canadian capital markets.” Ahead of this year’s AGM, some of Barrick’s biggest investors indicated they want to see even more changes. “If the board turns out to be completely tone deaf, I guess the board is completely tone deaf,” said Michael Sabia, the CEO of Caisse de dépôt et placement du Québec, in February. “They’ll have to live with the consequences of that.”
In the face of investor unrest, it was revealed Barrick and rival gold-mining giant Newmont Mining had hoped to announce a deal to merge ahead of Newmont’s annual meeting on Apr. 23. While the talks broke down without an agreement, the two sides reportedly still hope a deal is possible before Barrick’s AGM—a final match-up as the consummate deal-maker heads for the exit.
Munk has never thought of himself as being one of those shallow, self-made men who worships his creator. But I remember the moment during one of our many conversations, when he boasted about the extent to which the company defined his life: “Barrick is my life,” he told me, rising behind his desk. “It’s something I created. I conceived. I conceptualized. I lived. It’s a miracle not to be repeated. It will go down in the annals of business history.”
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