MARKETS SPECTATOR: Mackenzie's BHP packet

Andrew Mackenzie, BHP Billiton’s incoming chief executive, could earn as much as $US13 million a year. But Mackenzie will have to outperform by 30.7 per cent BHP Billiton’s competitors and the MSCI world index over a five-year period as well as exceed significantly short-term targets. No one, says BHP Billiton, has done that during the company’s current compensation structure.

BHP Billiton reckons Mackenzie will make a more modest $US7.6 million a year, described as the `target package’ by the company. That compensation is based on Mackenzie meeting long-term and short-term incentives. These include BHP Billiton’s profit, an assessment of its capital projects, health, safety, community and environment concerns as well as an analysis of Mackenzie’s personal performance by the board. That compensation is also dependent on BHP Billiton’s stock performing well against the MSCI world index and its global mining peers.

If Mackenzie’s and BHP Billiton’s performance is not good, then the Scottish born executive would make $US2.125 million annually, made up of base salary and pension.

BHP Billiton says 36 per cent of Mackenzie’s pay is short-term incentives, half of which is cash and half deferred shares over a two-year period. Thirty six per cent of Mackenzie’s pay is long-term incentives based around BHP Billiton’s share price against the MSCI and competitors while the remainder of his pay, 28 per cent, is base salary and pension.

Marius Kloppers, who will resign as BHP Billiton’s chief executive on May 10, had a maximum compensation package of $US18 million and a `target package’ of $US10 million. Kloppers’ minimum package was $US3.1 million.