Page 144 - Annual Report 2020

3.1 Annual statement by the Remuneration Committee Chair

The Committee believes the remuneration
outcomes for FY2020 reflect an appropriate
alignment between pay and performance
during the year and are also fair in terms
of the global context in which decisions
have been made.

Susan Kilsby
Chair, Remuneration Committee

Dear Shareholders, We were also pleased to again receive strong support for our
I am pleased to introduce BHP’s Remuneration Report for the overall Remuneration Report from shareholders at the 2019
financial year to 30 June 2020, which is my first since assuming AGMs, with approximately 96 per cent voting ‘for’ the report.
This continues our strong shareholder support over the past five
the Remuneration Committee Chair role, and I am looking forward
to engaging with shareholders as the Committee undertakes its work. years, where on average almost 97 per cent have voted in favour.
During FY2020, the Committee has continued its focus on achieving The Committee strives to implement the remuneration policy
remuneration outcomes that fairly reflect the performance of BHP, in a considered way:
and which are aligned to the interests of shareholders and other • We test the CEO’s remuneration against CEO roles in other global
key stakeholders. companies of similar complexity, size, reach and industry. The
FY2020 has been an unprecedented year, with the COVID-19 remuneration also reflects the CEO’s responsibilities, location,
pandemic having widespread impacts on lives, society and the skills, performance, qualifications and experience. This detailed
global economy. In the face of this, BHP employees have rallied in benchmarking ensures BHP’s executive remuneration packages
line with the Group’s purpose and values, working very effectively are competitive enough to attract and retain talented executives,
to keep the business running and performing strongly, and keeping without being excessive. External benchmarking shows the CEO’s
each other safe. target remuneration package is below the average for similar
I would like to thank my predecessor as Remuneration Committee global companies and importantly, can only be realised as actual
remuneration if performance targets are met.
Chair, Carolyn Hewson, for her leadership and for establishing a
Committee with a strong foundation of policies, principles and • The CEO’s remuneration is deliberately tied to the performance
practices upon which our decisions are able to be made. This is of the business, with the majority of remuneration delivered in
especially so in the unpredictable times in which we find ourselves. BHP shares, not cash. The CEO also has a minimum shareholding
We have also made other changes to the Committee this year. New requirement of five times pre-tax base salary, which continues for
Directors Gary Goldberg and Dion Weisler have joined Anita Frew two years post-retirement. This aligns the CEO to the experience
and Shriti Vadera on the Committee and I would like to thank all of BHP’s shareholders.
members for their contributions. • The exercise of reasonable downward discretion has been
Remuneration policy a feature of BHP’s approach over many years where the status
quo or a formulaic outcome does not align with the overall
The Committee sought and received approval from shareholders shareholder experience, and this remains unchanged.
at last year’s AGMs for a revised remuneration policy, with almost
94 per cent of votes in favour, and we believe the policy will serve The Committee is focussed on having and applying a remuneration
policy and approach that supports the Group’s strategy and enables
stakeholders well. The key changes approved for the CEO were: us to attract, retain and motivate the executives critical to delivering
• A change in the balance of incentive arrangements comprising: the best outcomes for all of BHP’s stakeholders. In addition, the
– a significantly reduced LTIP grant size of 200 per cent of base Committee is cognisant of the need to navigate the priorities
salary (on a face value basis), down from 400 per cent of differing jurisdictions.
– a CDP with a longer term focus than the former STIP. The CDP COVID-19
outcome is delivered one-third as a cash award, with two-thirds In early 2020, BHP began to experience the impacts of the
delivered in equity, as two-year and five-year deferred share
awards each of equivalent value to the cash award. This aligns COVID-19 pandemic. All BHP employees have come together as
one team to deal with the issues faced and despite the challenges,
participants’ incentive remuneration with performance over
the short, medium and long-term BHP’s results have been strong. The CEO and other ELT members
have provided strong and effective leadership through this period,
These two changes in combination did not materially alter the and the Committee is proud of the way BHP’s employees have
target value or vesting profile of incentive remuneration, but found new ways of working, collaborated to solve problems,
resulted in a 12 per cent reduction in the maximum possible supported each other and their communities, and aligned
remuneration for a year. around a common goal.
• A significant reduction in the pension contribution rate to
10 per cent of base salary, down from 25 per cent (noting that Despite the challenges the COVID-19 pandemic has presented,
the estimated workforce average is approximately 11.5 per cent in FY2020 BHP has not needed to furlough any employees
of base salary). As a result of this change, fixed remuneration for without pay, has not sought any government assistance, and
the CEO role has been reduced by 12 per cent and overall target did not raise additional equity. In addition, BHP’s strong, safe
remuneration reduced by 4 per cent. operational performance through this year, together with solid
• The introduction of a two-year post-retirement profitability, enabled the Board to announce a robust final dividend
shareholding requirement. payable to shareholders in September 2020. This follows a
record interim dividend paid to shareholders in March 2020,
While these changes took effect from 1 July 2019, existing short- and continues the delivery of strong and consistent returns
and long-term equity awards made under prior policies remain to shareholders. The COVID-19 pandemic increased costs and
on foot and will vest, subject to existing service and performance reduced volumes during FY2020, which negatively impacted
conditions, over coming years. executive remuneration outcomes.

142 BHP Annual Report 2020