BHP Billiton, the world’s biggest resources company by market value, will not increase the basic salary of more than 100 of its top directors, including CE Marius Kloppers, as it looks to show restraint and clamp down on costs.
The pay freeze for BHP’s top executives and its nonexecutive directors was revealed in the company’s annual report yesterday.
People familiar with the situation said BHP’s board and remuneration committee felt it was necessary to show "restraint" and "recognise the prevailing business climate".
BHP has responded to sharp declines in iron ore and coal prices by shelving multibillion-dollar expansion plans and closing operations. This month, its joint venture with Japan’s Mitsubishi announced plans to shut a second loss-making coking coal mine in eastern Australia, putting the jobs of 300 workers and contractors at risk. Xstrata, Rio Tinto and Anglo American have also axed jobs in Queensland this month.
BHP’s annual report showed remuneration for its entire senior team, or group management committee, had fallen last year as it was forced to write-down the value of US shale gas assets by $2.8bn because of falling natural gas prices.
Between 25% and 35% of BHP’s bonuses are based on profit after tax. In the year to June, BHP recorded a 34% drop in net profit to $15.4bn, down from a record $23.6bn for the year before, largely due to impairment charges and weaker commodity prices.
Mr Kloppers saw his total remuneration fall 40% to $6.6m last year after he declined to take a bonus as a result of write-downs on the Fayetteville shale gas assets, which BHP acquired from Chesapeake Energy a year and a half ago for $4.75bn.
His total pay package of $11m in 2010-2011 included $4.7m of performance-based bonuses, or short-term incentive rewards.
On a statutory basis — it uses a different accounting standard to calculate the value of share awards — his pay fell just 15% to $9.8m.
His basic salary will remain $2.2m this year and his total target remuneration will also be frozen, with BHP looking to keep the value of awards for long-term incentives for all senior executives on hold.
Last year Mr Kloppers was awarded deferred shares worth $3.4m.
Financial Times
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