Newcrest Mining told a proxy adviser it was engaged in a bidding war for Sandeep Biswas' services prior to hiring the former Rio Tinto man as its managing director, according to a report by advisory firm Ownership Matters.
The explanation was reportedly provided by Newcrest in response to further questioning by Ownership Matters over why the gold miner decided to pay Mr Biswas a remuneration package that is in some ways more generous than those given to the bosses of BHP Billiton and Rio Tinto.
Ownership Matters has joined ISS Governance and CGI Glass Lewis in taking exception to the remuneration package on offer to Mr Biswas, who joined Newcrest earlier this year and became managing director on July 4.
Mr Biswas can earn up to $10.35 million a year if all aspects of his remuneration package are paid out in full, under a structure that is 62 per cent more generous than that offered to his predecessor, Greg Robinson.
Like ISS, Ownership Matters believes shareholders should reject the remuneration report that Newcrest hopes to have approved at the company's annual general meeting on October 31. CGI Glass Lewis has recommended that shareholders should adopt the remuneration report.
Ownership Matters estimates the remuneration structure will allow Mr Biswas to earn an annual bonus of up to $4.6 million each year, all of which would be in cash.
The bosses of BHP and Rio cannot earn a bonus that large no matter how well they perform, and any bonus they do earn would require partial payment in equity.
"A cash annual bonus potential of this size is not appropriate given the volatility of Newcrest's earnings, given its exposure to the gold price and the capital intensive nature of its operations," Ownership Matters said in a note to Newcrest shareholders.
Mr Biswas will also earn a bigger base salary than the bosses of BHP and Rio. However, the maximum potential of his package remains lower than the maximum potential of his Rio and BHP counterparts.
Newcrest has previously said the generous package afforded to Mr Biswas was designed to drive improvement and high performance.
"The total package was determined with reference to the market at the time to attract a person of the CEO's operational calibre and experience," a spokesperson for Newcrest chairman Peter Hay said last week.
But Ownership Matters said it was told by Newcrest that Mr Biswas had two other job opportunities when he was hired, and the gold miner was duly forced to "set the CEO's package at the upper end of their target range".
"The company had found itself in a 'bidding war' where if they wanted Biswas as their CEO they were forced to pay a sufficient amount to attract him to join the group," Ownership Matters said.
The proxy advisor also recommended shareholders oppose the awarding of performance rights to chief financial officer Gerard Bond.
More than 12 per cent of Newcrest shareholders rejected the remuneration report last year, and several top-20 shareholders are understood to be considering a vote against the structure this year.
Two of the three major proxy advisors have recommended that shareholders reject Richard Knight's bid for re-election to the Newcrest board, while one out of the three advisors have recommended that Lady Winifred Kamit's re-election should be opposed.
