Andrew Mackenzie, CEO of mining giant BHP, has just finished his first full financial year at the helm.
With the release of the company’s annual report, usually the only place to find any information about pay scales, we can now work out what the CEO was paid in total.
One curious aspect is how he can pick up a pay packed of nearly $8 million for 12 months work and still have a pay freeze? His pay works out at more than $30,000 a day, five days a week.
The total is made up of base pay of $1.7 million, benefits of $92,000, short term incentive of $3.136 million, long term incentive of $2.635 million and a pension top up of $425,000.
This adds up to $7.988 million.
His base pay was frozen, while the average employee of BHP in Australia had a 2.3% increase and on average the 26,500 BHP staff in Australia had their benefits cut by 10%.
The big question is: is Mackenzie worth it?
Compared with his predecessor Marius Kloppers, Mackenzie’s pay is modest. Kloppers trousered between $14 and $16 million in each of four years from 2010.
This chart shows how Mackenzie was rated for his short term incentive performance over key areas:
Four of the measures were just over target and two were just under.
The profit target was US$13.3 billion and the actual, after adjustments, came in just ahead of that at attributable profit of US$13.8 billion.
Personal targets are hard to determine; few details are given, but they centre around delivery of projects, delivery against projects and “productivity and cost improvement, enhanced stakeholder relations and portfolio optimisation”.
Mackenzie was considered by the remuneration committee to have performed well against the individual measures.
“The CEO has contributed positively to the performance of the company… significant productivity improvements have been achieved during FY2014, relations with stakeholders have improved, and the Group’s portfolio optimisation efforts are progressing well,” the committee said.
Long term incentives are more complicated but are essentially awarded each year and based partly on share prices but they are usually set some years in the future.
For the 2015 financial year, Mackenzie’s long term incentive has a face value of US$6.8 million, about four times his base salary.
BHP provides this useful chart comparing the company to major market indices:
At first glance, BHP hasn’t performed very well, staying below the indices, but $100 invested in the Big Australian in 2009 would now be worth $1509 or so. Not too bad.
BHP likes this measure of Total Shareholder Return (TSR) which shows a 17.8% over-performance against the market.
No doubt Mackenzie likes showing that chart too.
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