The Motley Fool

Executive pay cuts a ‘commendable’ move by BHP

Fund managers believe that the need to cut the pay of executives is now being recognised by boards, following BHP Billiton’s (ASX: BHP) decision to do so last month.

Whilst one of the key focuses across the struggling mining sector has been to eliminate unnecessary costs and reduce spending, a number of executives, as well as the company’s former CEO Marius Kloppers, qualified to receive a combined $70 million worth of shares.

However, current directors of the board managed to reduce this payout by 35% or $23.4 million according to The Australian Financial Review, recognising that such payments were ‘excessive’.

In order for the executives to qualify for the scheme, BHP was gvien a target of outperforming its competitors by 30.5%, regardless of whether a gain or loss was realised. The company delivered a negative 9.4% total shareholder returns over the last five years whilst its competitors delivered returns of negative 44%.

Dean Paatsch from governance group Ownership Matters said that, although the miner did well in comparison to its peers, “the thing they could not sell was the negative result”, whilst also recognising the move as “the best example of shareholder pressure” he has seen.

Foolish takeaway

According to reports, Mackenzie himself had been allowed to collect 450,964 shares, however, he will only collect 243,126 of them. The CEO elected to forgo these share, and the company recognised that the move reflected “a more modest approach to remuneration befitting the times.”

Are you interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading


Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!