BHP puts top-level salaries on ice

Mining giant BHP (ASX, LON, NYSE: BHP) has frozen the salaries of its key executives for the coming financial year, while paying chief executive Mike Henry $6.1 million for the first six months on the job.

In its remuneration policy section of its annual report, the world’s largest miner said that Henry, who replaced former boss Andrew Mackenzie in January, received most of his salary through short- and long-term incentives.

Canadian-born Henry received a $1.87 million salary for the year —  a $1.7 million base and a 10% pension contribution. The additional $4 million-plus was a result of the CEO’s contribution to BHP’s long-term sustainability and shareholder wealth creation, the company said.

Susan Kilsby, chair of BHP’s remuneration committee said the figure represented “an appropriate alignment between pay and performance during the year.” She added it was also fair “in terms of the global context in which decisions have been made.”

Companies big and small have faced cost pressures as some mines have shut down and new safety measures have been adopted due to the coronavirus pandemic. Those measures are also expected to affect executive salaries.

BHP noted that Henry’s total target remuneration remained unchanged at $7.5 million, 12% lower than that of Mackenzie. The former CEO took home $2.4 million for the first half of the 2020 financial year and another $5.3 million as his 2015 long-term incentive.

Lowest pay packet

Henry’s pay packet, which places him toward the bottom of Australia’s top ten paid CEOs, also reflects the growing trend to simplify top executives’ pay.

His long-term incentive plan includes a maximum $3.4 million pay-out, while short-term bonuses include two tranches of shares over two and five years, worth up to $2.55 million, rather than an annual bonus.

In addition to longer-term remuneration, Henry is expected to hold BHP shares worth up to five times his base salary, another good sign for investors.

The Melbourne-based company reported last month a 4% drop in annual profit that missed analysts’ estimates. Underlying profit attributable from continuing operations for the year ended June 30 fell to $9.06 billion, below estimates of $9.42 billion, according to Refinitiv IBES data.

BHP said at the time the risk of new virus outbreaks around the world threatened to undermine growth and it was already weighing on the demand outlook for 2021.