BHP Billiton CEO Marius Kloppers. Picture: REUTERS
BHP Billiton CEO Marius Kloppers. Picture: REUTERS

FORMER BHP Billiton CEO Marius Kloppers retires officially at the beginning of October and stands to receive awards of company stock worth a total of about R151m during the four years after his departure.

Those shares will be in addition to the about R310m worth of BHP Billiton stock that Mr Kloppers already owned as of June 30 according to the BHP Billiton annual report for the year to end-June 2013 which was released yesterday.

According to the remuneration report employees who retire are entitled to hold share awards granted in prior years.

"However, the number of awards is reduced to reflect the period of service in relation to each grant. Under the pro-rating rule, Mr Kloppers will retain 504,675 awards and 412,649 awards will lapse."

At the existing JSE share price of about R300 per share those awards are worth about R151m but it is by no means certain that Mr Kloppers will get all of them.

That will depend on BHP Billiton’s "relative total shareholder return performance over the five-year periods to 30 June 2014, 2015, 2016 and 2017 respectively".

The remuneration report says: "Even if the performance hurdle is met, the (remuneration) committee has an overriding discretion under the plan rules to reduce the amount of awards that vest.

"Accordingly, the vesting outcome and the number of long-term incentive awards that will ultimately vest are unknown at this time."

In accordance with new UK regulatory requirements, the 2013 report also provides a "single figure of actual remuneration for the CEO" which shows that Mr Kloppers made $15.99m in 2013 (about R160m) which was barely changed from the $16.1m he made in 2012.

As previously reported, new CEO Andrew Mackenzie will earn materially less as CEO than Mr Kloppers as BHP Billiton has reduced remuneration packages so as to achieve "an appropriate alignment of remuneration with the prevailing business environment."

Mr Mackenzie’s pay for financial 2014 will include a "base salary" of $1.7m compared with the $2.2m that Mr Kloppers received.

His pension will be cut to 25% of base salary from the 40% that Mr Kloppers enjoyed and the "short-term incentive target opportunity" is being limited to a maximum of 240% of base salary from 320% previously.

The face value of Mr Mackenzie’s "long-term incentive award" for financial 2014 has been cut to $6.8m from the $8.4m that applied to Mr Kloppers in financial 2013.

According to the BHP Billiton report "Mr Mackenzie’s actual remuneration is linked substantially to business outcomes and shareholder returns."

"The ‘at risk’ component of his remuneration (short-term and long-term incentives) is 72% of his total target remuneration. Fixed remuneration (base salary and pension benefits) comprises 28% of the total," the report said.

"Mr Mackenzie’s annual short-term incentive is at risk. The minimum short-term incentive is zero, as was the outcome for Mr Mackenzie’s predecessor in financial 2012," it said.

"Mr Mackenzie’s long-term incentive is at risk. BHP Billiton’s business is long-term and decisions are made that are likely to have an impact for many years. It is therefore important that executives are rewarded over the long-term for long-term performance. BHP Billiton’s long-term incentive plan measures performance over five years."