In an interview in September with Ernst & Young, Barrick Gold’s (TSX: ABX; NYSE: GOLD) CEO Mark Bristow noted that all 37 partners at the company are required to be heavily invested as shareholders, which means they must own stock on a sliding scale up to five times their gross salary before they can realize any stock incentives. The Northern Miner picked up on that discussion recently in an exclusive interview with the mining executive about the history of that philosophy at the company he founded, Randgold Resources, and how he and Barrick’s executive chairman, John Thornton, have institutionalized that thinking at the new Barrick. This is an edited version of that conversation.
TNM: Can you tell me about your philosophy on management and ownership.
Mark Bristow: There’s a long history here and it’s an interesting thing you picked up. It goes back a long way. Barrick back in its early days when it was created by Peter Munk and Bob Smith, who was the operator, was a very entrepreneurial company. It did some amazing stuff and built quite quickly, and it was all about ownership, small office, corporate decisions made with real knowledge of the assets, etcetera and so it was run by owners even then, and they created wealth.
When I set up Randgold as a private company in 1994, we set out to build a real, what I call sustainably profitable mining business, which is a bit of an oxymoron, and definitely was back then. I started it with a single employee and my team, which is still part of the now merged team, most of those people grew with me and were naturally owners.
Barrick went off-piste a little bit over the last while, certainly around the last big gold market, and when John Thornton took over the reins, he introduced a “back to the future” strategy – that’s what he used to call it – to try to get Barrick back to where it came from. And core to that, coming from Goldman Sachs, John introduced a policy of forced ownership all the time you were employed at Barrick. That can be a good thing and can also be bad because you’re creating value and you can’t access any portion of the value you’re creating. But up until 2018, when I took over the reins, it was probably a good thing because it forced people to focus on business as owners. One of the things it did was to deal with debt and crises by sweating the assets, unlike many other resource companies that were managed by the over-exuberance of the last peak gold price and then ended up issuing more equity to solve the problem.
TNM: Can you tell me more about how you set that up at Randgold?
Bristow: For me, that concept of ownership and entrepreneurship was really a base that we started out with at Randgold. Our remuneration at Randgold, salary wise, was low down in the quartiles, it wasn’t at the top end of the market, but the equity incentives were high and even then, we had to keep stock. It was a five-year process before you could access your long-term stock incentives, and that built ownership. So when we put the companies together, John had introduced this concept of a partnership idea, and at Randgold I always had had a long-term equity incentive program that went very deep into the organization. So what I did was marry the Barrick concept of ownership with Randgold’s concept of ownership, and what we settled on was that even John, as chairman, has to continue to own at least four times his salary in stock. We had these same rules at Randgold and I have to own ten times my salary in stock. Of course John owns 30 times his salary in stock at the current share price, and I own over 90 times.
So what we did then together with our remuneration committee, was we restructured it. We’ve got 37 partners and they are expected to have up to five times their gross salary in Barrick shares or the equivalent of shares. One thing Barrick does which is unique, is we don’t issue shares to our executives, we buy them in the market and then we allocate them, whereas a lot of companies issue shares which dilutes your shareholders.
TNM: What about for other Barrick employees who aren’t named partners?
Bristow: When you look beyond the named partners that we disclose in our annual information circular, there’s a sliding scale of stock ownership requirements for non-executive partners of between 1.5 times and 2.5 times their gross salary and for executive partners of between 2.5 and 5 times. So when you get appointed and join the partnership, you are obliged then to hold onto the shares you earn over time, until you get to your respective share ownership requirement and if the share price goes down, then you’ve got to make that up again. So it’s completely aligned with our public shareholders.
TNM: Can you elaborate on the culture at Barrick?
Bristow: I genuinely believe that our culture is even more important than strategy. In all the companies I’ve run, we’ve invested in our executives to teach them how to be executives, strong internal and external programs on executive development, to understand strategy, global human resource concepts, the importance of licence to operate. At Randgold, nobody had not been to business school. And then integral to this and the partnership structure, is that you can lose your partnership in the current Barrick if you don’t fulfil the obligations of partner. Whether you are an executive or not, you can lose that ranking, so you lose that benefit.
TNM: How do you look at leadership?
Bristow: We look at leadership differently. If we have a very strong, motivated, rising star in our organization, they will be brought up in the organization even though they may be relatively junior in their executive skew. To be able to make it work, it’s very important that we reach down into the organization. People talk about succession so often. We cascade that succession review upwards rather than downwards, so we start with recognizing that we want to employ people with significant ability, and the gold industry and the mining industry in general doesn’t get that right.
Because of the unloved status of the industry, we tend to employ people at the back of the queue and we’ve changed that at Barrick. If you have the best people, your business immediately has a competitive advantage. So as a young graduate, you go through a series of processes starting with technical and behavioural training, then a best in class approach developing finance and commercial abilities, because even though you might be an engineer, our decisions come in dollops of millions of dollars, and so few people are properly equipped to make those decisions. And then we have executives and management development programs. We have to start right at the beginning, with young metallurgists, engineers, geologists, they go through certain programs and work through our various parts of the business and again you get keepers. People invest a lot of their heart and soul in developing that broader based skill-set.
TNM: How do demographics play into your strategic thinking?
Bristow: Things like demographics are big, too. At Randgold we were able to demonstrate that you can build world-class businesses in Africa with local people. The mining industry so often brags about how many locals they hire. In Mali at our Loulo-Gounkoto complex, it’s all Malian run, and it’s been running for 15 years, so it doesn’t take an age to develop competent executives.
The other part of it is this whole concept of female employees. This quota system, and people brag about it. But what we want is the best, and if you just do the math, if you just focus on men, you’re losing a whole lot of very remarkable people in the labour pool. For a woman to want to be part of the big organization that is engineering-heavy like mining, you’ve got to have motivation.
TNM: What do the numbers look like?
Bristow: It’s interesting that in North America, 16% of our employees are women, but when you look at new hires in the first three quarters of 2020, 26% of them were women. And that’s going right to the core of the problem. We’re going to employ smart people and when you do that, it happens to increase your percentage of women. It’s not a surprise. When I was in Africa some companies brought all these expats in and put a fence up, but what I found is that Africa’s intellectual curve was intact because so many smart people were trapped by poverty, or lack of education or opportunity, and if you take them to an international university they learn much faster than anyone else.
And if you look at Latam and Asia pacific, our hiring rate for women was 22% in the first three quarters of 2020 from a base of 10% women in the regional workforce. The other thing is our student and emerging talent programs have been successful in enrolling women ranging between 33% – 49% of our sponsored positions.
I’ve always said if you want to be world class you have to be global, and if you’re going to be global, your demographics and the whole team have to be structured so that I can take somebody who really understands the culture and make them a country manager. If you put a white European or American in as a country manager in Tanzania you’d be toast. If you put a top legal/public relations lobbyist in Tanzania to head up your business in Tanzania, you’re in a completely different league and that has cascaded down, and those people are all owners.
TNM: Having your employees feel like they have ownership in the company has been very important to you.
Bristow: I always say I want people to act like owners. What if an engineer has to make a decision about buying a $20 million mill? If someone buys a car, how much energy do they put into the decision? Or a house? How much analysis do you do? People in this industry just go and buy things, but if it’s theirs, they would have a completely different approach. So that’s what I try to engineer in every day executive activity is that our people are owners, and that’s the core component of really acting as owners. Because a large part of our executive team’s wealth is locked up and at risk every day in our company.