BHP under pressure to increase shareholder returns

The Australian Shareholders Association (ASA) has lashed out at mining heavyweight BHP Billiton (ASX: BHP) ahead of the group’s annual general meeting on Thursday, stating that management’s long- and short-term bonuses are excessive considering the company’s poor total shareholder performance.

Although the company’s remuneration report included “a number of positives”, including a reduction in CEO Andrew Mackenzie’s salary as well as a five-year scale for long-term bonuses, there is still misalignment between the payments to executives and shareholders.

For instance, according to the ASA, key executives could attract incentives worth between $4 million and $7 million as part of the long-term bonus scheme, which matures in the 2013 fiscal year. In comparison, a total shareholder return of negative 9% has been recognised.

What’s more, short-term bonuses were in fact higher this year than in 2012, despite the fact that the company reported greater asset impairments and a lower underlying profit.

As reported by The Australian Financial Review, the ASA will vote all available undirected proxy votes entrusted to it against the miner’s remuneration report.

Foolish takeaway

Following a decade of strong growth, miners such as BHP, Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG) are now under pressure by shareholders to decrease unnecessary capital spending and increase shareholder returns.

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

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