Page 145 - Annual Report 2020

During the COVID-19 pandemic, BHP has been especially conscious These outcomes took into account BHP’s strong HSEC performance
of contributing to the communities in which we operate, by doing during the year, with no fatalities recorded, and improvements in all
all it can to keep employees, their families and their communities key health and safety indicators, while environment and community
safe and healthy. BHP took action to slow the spread of COVID-19 outcomes were broadly in line with expectations. Financial and Strategic Report
into the workforce by investing in more transportation capacity, operating performance was strong, yet fell slightly short of the
restricting travel to the operations and protecting at-risk workers. stretching targets set at the commencement of the year.
BHP has also created hundreds of operational jobs across our While the COVID-19 pandemic impacted BHP, society and the global
Minerals Australia business, funded local health and social economy, the Group maintained continuity of operations while
programs in the communities where BHP operates, and for the keeping employees healthy and safe. Despite this, there were
Company’s small, local and Indigenous suppliers, BHP reduced the significant costs and other impacts of COVID-19 to BHP’s financial
time taken to pay their invoices to help address the financial stress results for FY2020. The direct costs have been recorded as an
they might otherwise face as a result of the pandemic. exceptional item in the financial statements. Nevertheless, the
Decisions and activities of the Committee Committee concluded that, while these COVID-19 related costs
A key element of the Committee’s work during the year was the were outside the control of management, they, together with the
remuneration implications of CEO succession. Mike Henry was volume impacts of COVID-19, should flow through to the financial Governance at BHP
appointed CEO and Executive Director effective 1 January 2020. measures for CDP scorecard purposes, thereby reducing the
Mike’s fixed pay on appointment was set at US$1.870 million per remuneration outcome for executives from what they would have
annum, which included a base salary of US$1.700 million per otherwise been. The Committee considered this was appropriate
annum plus a pension contribution of 10 per cent of base salary. in light of the global impacts of the COVID-19 pandemic.
This level of fixed pay was a reduction of 12 per cent from The Committee also considered each of the CEOs’ performance
Andrew Mackenzie’s fixed pay of US$2.125 million per annum. against their individual objectives. For Mike, this included assuming
Mike participates in the CDP and LTIP in accordance with the the CEO role, redefining and restructuring the ELT, enhancing the 3
approved remuneration policy. performance improvement focus, strategy review, portfolio value
Andrew Mackenzie stepped down as CEO and a Director of the and options analysis, accelerating gender balance aspirations, and
Group on 31 December 2019, and he retired from BHP on the work of the Tailings Dams Taskforce. For Andrew, this included
31 March 2020. The terms of Andrew’s departure announced enhancing the value of the portfolio, maximising performance
on 23 December 2019 reflected the Group’s remuneration options, and maintaining a robust ELT succession slate. The
policy and the rules of our incentive arrangements and leaving Committee considered both Mike’s and Andrew’s performance Remuneration Report
entitlements as approved by shareholders. Further information against their individual objectives to be in line with target.
in respect of this is provided in sections 3.3.13 and 3.3.24. While the CEOs’ scorecard outcomes were determined at
Other key decisions and activities of the Committee during 96 per cent of target and the scorecard outcomes for other
FY2020 included: Executive KMP were on average marginally ahead of target,
• Completing the 2019 review of the remuneration policy and the short-term incentive pool applicable to the majority of
seeking and gaining the approval of shareholders at the 2019 AGMs BHP employees below the ELT level was above target. This was
considered appropriate and due recognition, given the excellent
• Considering remuneration for other members of the ELT and the performance across BHP’s whole workforce in the face of the Directors’ Report
Group Company Secretary COVID-19 pandemic, where, despite this, strong safety performance
• Aligning the determination of CDP equity award sizes and operational continuity was achieved during FY2020.
to a 12-month pricing approach, also used for LTIP awards,
to minimise potential volatility over time The vesting outcome for the 2015 LTIP against the relative TSR
• Setting and reviewing outcomes against performance measures performance conditions was 48 per cent, and this is the first
and conditions of relevant incentive plans vesting under the program since 2014. BHP outperformed the
• Redesigning, with the support of the Sustainability Committee, sector peer group significantly, but did not meet the performance
threshold for vesting against the MSCI World index. This
the HSEC component of the CDP scorecard to give greater 48 per cent level of vesting is aligned with the long-term average
weight and transparency to climate change vesting under the LTIP since its inception 16 years ago. Consistent
• Reviewing the fee for the BHP Chair with prior practice, the Board and Committee has conducted a Financial Statements
• Reviewing and adopting changes and improvements flowing holistic review of business performance over the prior five years
from regulatory requirements and guidance, which in turn helps since grant to ensure this level of vesting was appropriate.
us improve our processes and approaches
• Engaging with shareholders and other key stakeholders Further details in respect of overall remuneration outcomes for the
year for the CEOs, together with information on how the outcomes
• Undertaking regular reviews of workforce engagement, are aligned to performance during FY2020, are provided in section
workforce remuneration and related policies, remuneration 3.3. As at the date of this report, Mike’s shareholding meets the
by gender and the annual Shareplus enrolment update minimum shareholding requirement of five times pre-tax base salary.
CEOs’ remuneration For FY2021, the Committee determined that Mike’s base salary
The scorecard against which the CEO’s annual performance is remains unchanged at US$1.700 million per annum, as it was at the
assessed comprises stretching performance measures, including time of his appointment. In addition, the other components of his Additional information
HSEC, financial and individual performance elements. For FY2020, total target remuneration (pension contributions, benefits, CDP and
the Remuneration Committee has assessed Mike Henry’s and LTIP) also remain unchanged. A summary of Mike’s arrangements
Andrew Mackenzie’s performance and determined CDP outcomes for FY2021 is set out below.
of 96 per cent for each of them, against the target of 100 per cent
(and the maximum of 150 per cent), with the outcomes prorated
to reflect their periods as CEO.

FY2021 CEO remuneration
Fixed remuneration CDP LTIP
• Base salary US$1.700 million per annum. • Target cash award of 80 per cent of base • The annual LTIP grant is based on a face Shareholder information
• No change to base salary. salary (maximum 120 per cent ). value of 200 per cent of base salary.
• Pension contribution 10 per cent • Plus two awards of deferred shares each • Our LTIP awards have rigorous relative
of base salary. of equivalent value to the cash award, TSR performance hurdles measured
vesting in two and five years, respectively. over five years.
• Three performance categories:
– HSEC – 25 per cent
– Financial – 50 per cent
– Individual performance – 25 per cent

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