Mining financier Stan Bharti, right, counts talk show host Larry King among his advisers.Kathryn Gaitens/Getty Images
Globe-trotting junior mining financier Stan Bharti has been targeted by a shareholder activist in a boardroom battle that could test the limits of compensation at money-losing companies.
Mr. Bharti, through his private, family-owned Toronto company Forbes & Manhattan, manages a large portfolio of publicly listed resource startups with mostly undeveloped properties in such remote corners as Kurdistan, Ethiopia and Mongolia. Mr. Bharti and a close-knit group of executives and directors have pocketed millions of dollars in consulting fees, bonuses and other payments at a time when a number of companies managed by Forbes & Manhattan have suffered declining financial health and stock performance.
His roster of advisers and directors includes retired Canadian major-general Lewis MacKenzie, former federal cabinet minister Pierre Pettigrew and Canada's former ambassador to Iran, Ken Taylor. Mr. Bharti's most prominent adviser, CNN talk show host Larry King, described himself in a Forbes & Manhattan promotional video as a global ambassador. "I provide the contacts, Stan does the close," he said. which "equals success."
In recent years, Mr. Bharti and his family have hosted lavish investor conferences at exclusive resorts, in Mexico and Brazil, featuring vodka-cooling ice sculptures and high-profile businessmen such as Eike Batista and Jim Rogers.
The good fortune, however, has not been enjoyed by stock holders, most of whom are small retail investors. Stock prices of resource ventures managed by Forbes & Manhattan have plunged sharply in recent years, prompting some shareholders to question compensation, stock deals and other transactions.
San Francisco activist investor Ryan Morris said Tuesday afternoon that he is launching a proxy battle to replace all seven directors at one of Forbes & Manhattan's core holdings, Aberdeen International Inc.
Mr. Morris is critical of a recent Aberdeen private stock sale and lucrative compensation practices at a company struggling with losses and a collapsing stock price. Mr. Pettigrew, an Aberdeen director since 2007, resigned with two other directors from the board on Friday. The company named the former ambassador Mr. Taylor, who has served on the boards of other Forbes & Manhattan companies, as one of three new board appointees.
Mr. Bharti and senior executives at Aberdeen did not respond to requests for comment.
Mr. Morris said in a statement issued yesterday that Aberdeen has rebuffed efforts to engage in "constructive dialogue" with him and other shareholders to improve the company's governance. His statement said Aberdeen's appointment of new directors "merely shuffles the deck" at the board.
"While we certainly respect the prominence of certain Aberdeen board members, historically poor performance for shareholders speaks for itself. We are nominating a slate of highly qualified and independent directors who intend to dramatically lower insider compensation while focusing on creating value for all shareholders," he said in his statement.
Mr. Morris owns a 4-per-cent stake in Aberdeen and his campaign to unseat directors is backed by British fund manager Nightscape Capital (UK) LLP, which owns 5 per cent of Aberdeen's stock.
Nickolas Stukas, a managing partner with Nightscape Capital, said the company has been "disappointed" with Aberdeen's failure to respond to shareholder concerns.
Mr. Morris is a Canadian-born engineer who shifted to activist investing through his San Francisco company, Meson Capital Partners. His move to replace Aberdeen's directors marks the third time in two years that compensation and payment practices at a company linked to Mr. Bharti prompted shareholders to push for changes to the board. New directors were appointed at Dacha Strategic Metals Inc. and Longford Energy Inc. in 2012 after proxy battles were launched by Toronto institutional investor Goodwood Inc.
Aberdeen was targeted by Mr. Morris after the company declined to revise a $2-million private placement of stock and warrants that he said excessively diluted the value of Aberdeen stock. Mr. Morris said the company refused to discuss his proposal last month and, instead, more than 50 per cent of the placement was sold to insiders and a company affiliated with Mr. Bharti.
Aberdeen said in a statement last month that Mr. Morris's offer was non-binding, disruptive and designed for his "own selfish benefit without regards to the interests of Aberdeen or its other shareholders."
Mr. Morris said he is concerned about lavish compensation practices at Aberdeen. According to regulatory filings, Aberdeen has paid a total of more than $10-million during the past three years in salary, bonuses and other incentives to its executive chairman Mr. Bharti, its executive vice chairman George Faught, and chief executive officer David Stein. During that time, Aberdeen reported more than $84-million in losses and its stock price tumbled from nearly $1 a share to below 20 cents on the TSX Venture Exchange.
Forbes & Manhattan and Mr. Faught and Mr. Stein are eligible to earn as much as $8-million more under so-called change-of-control clauses in their executive employment contracts. According to Aberdeen's regulatory filings, change-of-control payments are triggered by such changes as the replacement of a majority of directors.
Mr. Morris said he intends to challenge the change-of-control payments as contrary to shareholder interests.