April 18, 2017 / 3:05 PM / a year ago

Shareholders in Chilean lithium firm SQM shake up governance

SANTIAGO, April 18 (Reuters) - Three top shareholders in Chile’s SQM have agreed to change the way board decisions are made at the global supplier of lithium, they said, a move that will see controlling shareholder Julio Ponce cede some power and Canada’s Potash Corp gain more say.

The agreement, announced late on Monday, was sent to Chile’s securities regulator and signed by Potash Corp, Ponce-controlled Pampa Calichera, and Japan’s Kowa. It stipulates that at least five of the eight board members must agree to any future decision, and that the chairman no longer exercises a vote in the event of a deadlock.

Potash Corp holds just over 30 percent of SQM , and has three board seats, while Kowa and Pampa Calichera have a joint voting pact that gives Ponce say over four seats. Previously, the chairman had the casting vote in the event of a tie. The current chairman is Eugenio Ponce, Julio Ponce’s brother.

The move indicates that Ponce has agreed to cede some power, potentially opening up the way for a rapprochement with the center-left Chilean government, with which SQM is in dispute.

Julio Ponce is a controversial and divisive figure. The former son-in-law of late Chilean dictator Augusto Pinochet, he has held power at SQM since it was privatized under Pinochet in the 1980s. In 2014 he was fined for market manipulation.

SQM has exclusive rights to tap vast reserves of lithium and other minerals in the Chilean desert. But it is in a legal dispute with government agency Corfo over royalty payments, which has weighed heavily on its stock.

Corfo’s head has repeatedly criticized Ponce and told Reuters in January that developing a good relationship with SQM was impossible while Ponce remained in control.

The new agreement came after Potash, Kowa and Ponce had agreed that “the interests of SQM and all of its shareholders would be better served going forward with the SQM board of directors operating with as large a consensus base as possible,” Potash Corp said in a statement.

“Potash Corp believes this is a step forward in improving corporate governance for all SQM shareholders.” (Reporting by Rosalba O’Brien; Editing by Paul Simao)

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