BHP Billiton CEO Pay Packet Shrinks -- Update

By Rhiannon Hoyle 

SYDNEY--The pain from slumping commodity prices is being mirrored in the pay packages of BHP Billiton Ltd.'s top ranks as the mining company slashed directors' wages and Chief Executive Andrew Mackenzie's salary package was cut nearly in half for the past fiscal year.

On Wednesday, BHP said Mr. Mackenzie earned US$4.6 million in cash and stock options, in addition to other benefits such as pension contributions, for the year through June. That was down 43% from the US$8 million pay package he received a year earlier, which was his first at the helm of the world's largest miner by market value.

Softening demand for commodities such as iron ore and crude oil, coupled with rising supply, have made it more difficult for executives like Mr. Mackenzie to hit performance targets that were set years earlier during a China-led boom. Global miners including BHP have reported steep reductions in profits, which have often been weighed by hefty write-downs on assets acquired when commodity prices were peaking.

BHP, which recently reported its weakest annual earnings since 2003, also said it was cutting pay to its chairman by 13% and would reduce the fees for nonexecutive directors in response to the weak outlook for commodities.

Mr. Mackenzie's total pay declined after shareholder returns slumped, the company took US$2 billion in impairment charges against its onshore U.S. petroleum business and five workers were killed at its global operations, which span from Australia's arid Pilbara region to the high peaks of the Andes in Chile.

BHP said total shareholder return fell 15% over the five years through June compared with a 4.5% decline in the peer group that it measures itself against.

Some analysts, however, question whether that measure remains relevant as the global resources sector downshifts. "Setting appropriate long-term targets for resources companies is a challenging task, but we believe remuneration needs to be more nuanced than the current focus on total shareholder return," Goldman Sachs said in a Sept. 10 note.

BHP said it would "continue to listen and give attention to feedback and views from shareholders on the group's approach to pay."

It also praised Mr. Mackenzie's stewardship of the spinoff of South32 Ltd., which was carved out of the group earlier this year to house some assets such as alumina refineries and manganese mines that the company decided were no longer core operations.

The pay package of BHP's top executive is now well below levels awarded when commodity prices were booming. When Mr. Mackenzie took on the role in May 2013, he agreed to a base salary that was almost 25% less than that collected by his predecessor, Marius Kloppers, as well as a lower pension payout and smaller maximum bonus.

The company said it would keep Mr. Mackenzie's base salary of US$1.7 million unchanged for the year ahead. BHP also froze wages for the rest of its executive team.

However, pay for BHP Chairman Jac Nasser and the miner's nonexecutive directors, which has remained flat since 2011, will be pared back, the company said. Most miners remain focused on austerity as a decadelong commodity price boom ends.

"The board, with support from the chairman, has decided to reduce the chairman's fee" by 13% to US$960,000 a year, BHP said. Mr. Nasser and Mr. Mackenzie also decided to cut the annual base fee of nonexecutive directors by 6% to US$160,000, it said.

Write to Rhiannon Hoyle at [e-mail]

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(END) Dow Jones Newswires

September 22, 2015 23:41 ET (03:41 GMT)

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