Mining firm’s chief executive, Mick Davis, could receive £50m in deal packaged with vote on takeover by Glencore

The figure of up to £50m over three years, or £45,000 a day, is rumour. But it is clear Mick Davis is about to be handed a very large retention package to stay at the mining firm Xstrata after Glencore’s intended takeover of the company.

What’s more, it seems likely that the reward for Davis, chief executive of Xstrata, is only part of the story: Glencore wants to retain the bulk of Xstrata’s management and so will also shower rewards on others there.

Are we talking £100m all in? £200m? More? Much more? All will be revealed when the prospectus is published this week. But we know already that no performance conditions will be attached to the payments. Davis & co will simply have to turn up for work for three years and get on with their job of running 150 mines around the world.

Just in case Xstrata shareholders are minded to protest about this arrangement, the retention payments will be wrapped up with the vote on the all-share takeover itself.

In other words, if they want to kill Big Mick’s payday, then they will have to kill the deal itself. The chances of that happening are judged to be tiny, since the Qatar Investment Authority has discovered a large appetite for Xstrata shares and has emerged, in the last couple of months, with the largest stake besides Glencore’s 35%. The QIA is said to be a big fan of the deal and its promised savings of $500m.

The would-be refuseniks in the ranks of Xstrata’s shareholders appear resigned. They don’t like the takeover terms, they don’t want to own shares but they think Glencore’s chief executive, Ivan Glasenberg, will bag his prey; thus several have been happy to feed the QIA’s buying.

Unsatisfactory? That’s life in the rough-and-tumble world of mergers and acquisitions, it might be said.

Yes, it is true that everyone knew Glasenberg’s intention in floating Glencore last year was to get a transparently valued acquisition currency so as to pursue his long-held ambition of buying the rest of Xstrata. Nor can anyone be surprised that the terms (2.8 Glencore shares for every Xstrata share) look less than generous.

But Xstrata’s shareholders had the right to expect an insistence on the part of their independent directors, led by the chairman, Sir John Bond, that any retention payments had performance conditions attached.

The principle is straightforward: align management’s interests with shareholders. What if, post-takeover, Glencore’s commodity traders lose their magic touch and Glenstrata shares disappoint? Former Xstrata shareholders will regret the deal but Davis & co will profit from it: that’s a basic misalignment.

And, please, spare us any plea that the retention payments will be share based. If the starting point is several tens of millions of pounds, the recipient can tolerate a slippage in value. The arrangements, if confirmed, stink.