19 Apr New CEO sets frugal agenda for BHP
BHP Billiton executives will work under a more frugal pay regime, after new chief executive Andrew Mackenzie reshuffled and redesigned the company’s leadership ranks.
The BHP board has used the management reshuffle – which included the demotion of petroleum chief Mike Yeager, ferrous boss Marcus Randolph and aluminium’s Alberto Calderon from the company’s top ranks – as an opportunity to wind back the level of remuneration being paid to top brass.
Mr Mackenzie (pictured below) is himself expected to earn about 25 per cent less than his predecessor, Marius Kloppers, in a reflection of the tougher times being felt across the mining industry and the broader economy.
While he can still earn a maximum of $US12.58 million ($12.2 million) a year if BHP performs exceptionally well, Mr Mackenzie’s base salary of $US1.7 million will be lower than the $US2.2 million base salary paid to Mr Kloppers.
Mr Mackenzie will also be paid a lower pension benefit, have a tighter cap on short-term bonuses, and his minimum shareholding requirements will also be tougher than those imposed on Mr Kloppers.
BHP said a higher proportion of Mr Mackenzie’s package was linked to performance, and the company expects him to earn $US7.6 million a year if his targets are met.
When asked if the members of the reshuffled group management committee would also earn less than before, a BHP spokesman said: ”You would expect to see a not dissimilar reduction … the same concepts and philosophies that have gone into Andrew’s package have gone into their packages, too.”
But remuneration for BHP’s board of directors remains unchanged at this time.
Pru Bennett, a remuneration expert from BlackRock, said BHP’s pay changes were part of a trend that had been under way for two years.
Property companies Dexus and Stockland seized upon chief executive changes in 2011 and 2012 to cut fixed salaries by about 6 per cent and 21 per cent respectively.
Tap Oil announced on Thursday that managing director Troy Hayden had agreed to cut his base salary by 23 per cent to $500,000 a year, under a deal that will give him greater exposure to share options.
Rio Tinto has also moved to reform its system of long-term incentives for executives and its London shareholders were set to vote on changes on Thursday night.
”There is definitely a trend around reducing executive remuneration and we are likely to see more of it, particularly when there is a change of CEO,” Ms Bennett said.
”It’s a combination of shareholder pressure, community pressure and also the general trend for companies to be reducing cost structures.”
The three departing executives, particularly Mr Randolph, were seen as Mr Mackenzie’s main rivals for the top job at BHP.
Mr Randolph is unwell and not expected to return to work for several months, while Mr Calderon will briefly serve as an adviser to Mr Mackenzie but is expected to leave the company within coming years.
Mr Yeager’s retirement comes as rising US gas prices make his controversial $US20 billion punt on US shale gas look better than at any stage over the past two years.
Herbert Smith Freehills lawyer Geoff Healy was the only hiring from outside the company, and will become BHP’s chief legal counsel.
The new leadership team
Andrew Mackenzie, CEO
Peter Beaven, copper
Tim Cutt, petroleum and potash
Dean Dalla Valle, coal
Geoff Healy, chief legal counsel
Mike Henry, HSEC, marketing and technology
Graham Kerr, CFO
Daniel Malchuk, aluminium, manganese and nickel
Jane McAloon, governance, company secretary
Jimmy Wilson, iron ore
Karen Wood, people and public affairs