It's not exactly the Saturday Night Massacre, where President Nixon fired the special prosecutor investigating Watergate and forced the resignations of his attorney and deputy attorney general, but the ouster of Barrick Gold (NYSE:CEO) CEO after just two years on the job is surprising nonetheless, even if, as reports maintain, he and the miner's new chairman didn't agree on much.
Because it follows the failed merger attempt of rival Newmont Mining (NYSE:NEM) earlier this year, and comes after the boardroom upheaval Barrick endured late last year, it signals there's still a lot of dysfunction in the company's upper management. Especially when you consider two directors resigned in a huff over the appointment of two supposed independent directors -- who were chosen by the miner's retiring co-chairman and were seen as still beholden to him.
President and CEO Jamie Sokalsky will be stepping down from Barrick on Sept. 15, to be replaced, not by a new chief executive, but rather by two new co-presidents, positions that will be filled by current senior managers. Billed as a means of enabling Barrick to meet the "distinct demands and challenges of the mining industry in the 21st century," it also serves to consolidate power in the hands of the miner's chairman John Thornton, who seems to be continuing the tradition of continuous turnover at the CEO position.
Under former chairman Peter Munk, Barrick fired three CEOs in about a 10-year period, and Sokalsky himself assumed the role in June 2012 when then-executive Aaron Regent was tossed out amid falling gold prices and a slumping stock. No doubt Sokalsky knew his hold on the corner office was tenuous at best.
After all, he was not privy to the negotiations that were enjoined for the proposed Newmont merger, and when Barrick entered into a subsequent joint venture with Saudi Arabia Mining, Sokalsky was not a part of that either. Had the deal with Newmont been successful, assets that would have been spun off to make the deal work would have had Sokalsky shipped off to oversee them. When the talks crumbled, some anticipated he would be leaving sooner rather than later since it was apparent his authority was severely diminished.
The management upheaval also led to some immediate speculation there would be a rapprochement with Newmont and merger talks would resume. Thornton nixed the suggestion, saying it was "not on our mind" though it remains open to the possibility.
Although some big investors welcomed the change, believing the miner hasn't had effective management that's resulted in a depressed stock, it would seem much of the blame ought to be laid at the feet of former chairman Munk. After all, it was Munk who presided over overpaying for Australian copper miner Equinox and for not realizing sooner the problems associated with the stalled Pascua-Lama gold and copper project in Chile. Barrick has suffered not only from slumping gold prices, but having to take massive writedowns on those assets.
By leaving the CEO position vacant -- Thornton says he has no interest in filling the position himself -- it consolidates the miner's power in his hands, but also serves to remove the impression there was dissension among the ranks. It also puts Thornton's imprimatur on the miner. At the company's annual meeting in April, Munk had praised Sokalsky and identified him as one of the key people that would lead Barrick forward, calling him part of "a team I would bet on."
For public consumption, though, Thornton says the move drives forward the plans in place for "operational excellence," while allowing Barrick to continue optimizing its portfolio and cutting costs. He further maintains the new corporate structure will stress a "partnership culture."
What it really means is that the more things change, the more they remain the same. Barrick Gold is still a place of upheaval, but with the concentration of control in John Thornton's hands, the reward for success -- or blame for failure -- now rests squarely on his shoulders.