BHP's new boss to take a pay cut
World's largest mining company seeks to reduce costs as commodity prices fall
BHP Billiton, the world's largest mining company, will pay its incoming chief executive Andrew Mackenzie less than his predecessor at a time of declining commodity prices and revenue for the industry.
Mackenzie, who will take over from Marius Kloppers, 50, on May 10, will be paid a base salary of US$1.7 million during the 2014 financial year, the Melbourne-based company said. Kloppers' base salary in 2007, when he became chief executive, was US$1.85 million. In 2012, it was US$2.2 million. BHP also reduced Mackenzie's retirement benefits and cut the maximum of performance-linked payments.
"Some downward rebasing at this time is appropriate," chairman Jac Nasser said.
An expected slowdown in demand for minerals makes cutting costs and boosting productivity a "top theme" for the company, Mackenzie, 56, told the ABC broadcaster in February.
BHP unveiled US$1.9 billion in cost savings when it released its half-year results on February 20, as net income declined 58 per cent because of lower commodity prices.
The reduction in salary "shows they're serious about cost cutting and controlling cost", said Paul Phillips, a fund manager with Perennial Growth Management who holds BHP shares.
BHP will pay Mackenzie a pension of 25 per cent of base salary, a decrease from 36 per cent, as well as a short-term incentive target of a maximum of 240 per cent of his salary, reduced from 320 per cent, according to a statement. His total target pay for fiscal 2014 will be US$7.6 million. That compares with Kloppers' US$6.6 million total pay during fiscal 2012 and US$11.1 million during fiscal 2011, according to BHP's annual report.
Kloppers' departure came amid a changing of the guard among diversified mining companies as the industry battles declining revenues following a decade-long boom in demand for minerals. Sam Walsh replaced Tom Albanese at the helm of Rio Tinto Group in February after failed deals in aluminium and coal caused US$14 billion in write-downs. Cost overruns contributed to Cynthia Carroll's departure as chief executive of Anglo American, which slashed US$4 billion off the value of an iron ore project in Brazil.
BHP named diamond unit president Tim Cutt to succeed Michael Yeager as head of its petroleum division. Yeager, a graduate of the US Naval Academy, will retire on July 1, the company said in a separate statement.
Alberto Calderon will be replaced as aluminium president by Daniel Malchuk, though he will remain as an adviser to Mackenzie.