TIDMBHP
RNS Number : 3479T
BHP Group PLC
13 November 2019
NEWS RELEASE
Release Time IMMEDIATE
Date 14 November 2019
Release Number 22/19
Mike Henry to become BHP Chief Executive Officer, effective 1
January 2020
The Board of BHP today announced that Mike Henry has been
appointed Chief Executive Officer (CEO) of BHP, following a
thorough succession process.
Mr Henry will assume the role of CEO and Executive Director
effective 1 January 2020, replacing Andrew Mackenzie who will
retire as CEO on 31 December 2019.
Mr Henry has 30 years' experience in the global mining and
petroleum industry, spanning operational, commercial, safety,
technology and marketing roles. He was appointed to his current
role of President Operations Minerals Australia in 2016, and has
been a member of the Executive Leadership Team since 2011.
Mr Henry joined BHP in 2003, initially in business development
and then in marketing and trading of a range of mineral and
petroleum commodities based in The Hague, where he was also
accountable for BHP's ocean freight operations. He went on to hold
various positions in the Company, including President Coal,
President HSE, Marketing and Technology, and Chief Marketing
Officer. Prior to joining BHP, Mr Henry worked in the resources
industry in Canada, Japan and Australia.
Chairman Ken MacKenzie said: "Mike Henry's deep operational and
commercial experience, developed in a global career spanning the
Americas, Europe, Asia and Australia, is the perfect mix for our
next CEO. I am confident his discipline and focus will deliver a
culture of high performance and returns for BHP. Mike has been a
strong advocate for the industry, driving higher standards of
safety and a commitment to our local communities and global
stakeholders.
"We would like to recognise the outstanding contribution of
Andrew Mackenzie to BHP as CEO. Under his leadership, BHP has
transformed into a simpler and more productive company, financially
strong and sharply focused on value for shareholders. We thank him
for his vision and hard work, which has changed the way we operate
and engage with the world."
Outgoing CEO Andrew Mackenzie said: "It has been a privilege to
serve as CEO of BHP. Our products are essential to global economic
development and we deliver them in a way that creates significant
value, for our shareholders, our employees, communities, nations
and the world. BHP is in a good position. We have a simple
portfolio, a strong balance sheet and options to grow value and
returns for decades to come.
"Fresh leadership will deliver an acceleration in the enormous
potential for value and returns that will come from BHP's next wave
of transformation. Choosing the right time to retire has not been
an easy decision, however the Company is in a good position. I am
confident Mike and BHP will seize the many opportunities that lie
ahead."
CEO-Elect Mike Henry, said: "I am honoured and privileged to be
appointed as CEO and to have the opportunity to lead the talented
and hard-working people who make BHP a great company. For more than
130 years, through the ingenuity and commitment of its people, BHP
has delivered shareholder value while successfully adapting its
portfolio, operations and products. Today we are even safer, more
predictable and more focused.
"We will unlock even greater value from our ore bodies and
petroleum basins by enabling our people with the capability, data
and technology to innovate and improve. We must operate safely,
with discipline and reduce our impact on the environment. With the
right people and the right culture we will deliver value and strong
returns for shareholders and for all of society."
Remuneration
Mike Henry's employment contract will be effective from 1
January 2020.
BHP Chairman Ken MacKenzie said: "This remuneration package is
designed to motivate a high level of performance, and align with
our shareholders' expectations and community views. The package is
consistent with that applied for Andrew Mackenzie and the
remuneration policy approved by shareholders at BHP's 2019 Annual
General Meetings (AGMs). It is broadly consistent with other roles
in global companies with similar global complexity, size and reach,
and is reflective of the CEO's significant responsibilities. A high
proportion of actual remuneration received will be directly
dependent on performance, with 75 per cent of total target
remuneration represented by incentive plans, and only 25 per cent
in fixed pay."
The key components of Mr Henry's remuneration are:
- A base salary of US$1,700,000 per annum;
- A pension contribution of 10 per cent of base salary;
- A Cash and Deferred Plan (CDP) target cash award opportunity
of 80 per cent of base salary, with two tranches of deferred shares
to be awarded, each to the equivalent value of the actual cash
bonus received, vesting in two and five years respectively (the
maximum CDP award is 1.5 times the target award); and
- A Long Term Incentive Plan (LTIP) award of 200 per cent face
value of base salary (subject to shareholder approval).
Andrew Mackenzie will step down as CEO, a member of the
Executive Leadership Team and an Executive Director of the Company
on 31 December 2019, and will retire from the Group on 30 June
2020. Mr Mackenzie will work through the applicable notice period
and accordingly no severance payment will be made. He will receive
his base salary and pension entitlement to the date of his
retirement.
In conjunction with our new remuneration policy recently
approved by shareholders, BHP introduced a requirement effective 1
July 2020 for the CEO to continue to hold their BHP shares for two
years beyond retirement. While this requirement is not technically
applicable to Mr Mackenzie as he will retire on 30 June 2020, to
demonstrate his commitment to and confidence in BHP's future
success, Mr Mackenzie has voluntarily committed to comply with this
post-retirement shareholding requirement.
Mr Mackenzie's remuneration will be in accordance with
shareholder-approved arrangements. In summary:
- Any incentive payment under the CDP for FY2020 can only be
assessed by the Remuneration Committee at the end of the financial
year;
- That payment will be pro-rated to reflect his period of
service as CEO during FY2020 (namely, 1 July 2019 to 31 December
2019);
- Awards granted in previous years under the LTIP will be
pro-rated in accordance with the Company's usual practice. They
will vest only if the performance hurdle is met at the end of each
five-year performance period; and
- Mr Mackenzie will be entitled to the value of the pension and
superannuation funds that he has accumulated over his years of
service with the Company.
Summaries of the key terms of Mr Henry's employment contract and
Mr Mackenzie's retirement arrangements are set out in the attached
schedules.
Further information on BHP can be found at: bhp.com
Appendix 1
Mike Henry biography
Mike Henry has been President Operations, Minerals Australia
since February 2016. He has been a member of the Executive
Leadership Team since 2011. In his current capacity, Mr Henry is
responsible for BHP's iron ore, coal, copper and nickel assets in
Australia, leading nearly 40,000 people across six assets, with
revenues of US$29 billion, EBITDA of US$16 billion and capital
spend of US$3 billion.
Under his leadership, there has been a 60% reduction in the
frequency of high potential injuries in Minerals Australia. BHP has
become the lowest cost major iron ore producer in the world. A
turnaround of Nickel West led to the decision to return the
business to core in the BHP portfolio. He has delivered major
capital projects, including South Flank, at half the capital
intensity of prior major projects in West Australian Iron Ore, and
has implemented BHP's first full-scale autonomous haulage system at
Jimblebar.
In his current capacity, Mr Henry has designed and implemented a
BHP-wide operating system and the Maintenance and Engineering
Centre of Excellence, which has delivered material cost savings and
improved uptime across key classes of equipment. He has established
a new employment model and approach to skills building in Australia
through Operations Services. Mr Henry is a committed advocate for
the industry and, in 2018, was part of the Federal Government's
Resources 2030 Taskforce.
Mr Henry is a champion of diversity. Over the past three years
under his leadership, BHP's Minerals Australia business has nearly
doubled its number of female employees, and increased indigenous
employment from 4.1 to 5 per cent.
Mr Henry has previously held roles accountable for health,
safety and environment, technology, capital projects, supply,
logistics and marketing and trading. His 30-year resources career
has spanned four continents and all of BHP's commodities. He has
led teams in 18 countries.
Mr Henry is Vice Chair of the Minerals Council of Australia.
He was born in Canada, holds a Bachelor of Science (Chemistry)
from the University of British Columbia and lives in Melbourne with
his wife of 30 years. He and his wife have two adult daughters who
live in Canada.
Career history
2016 - present President Operations, Minerals Australia
2015 - 2016 President, Coal
2013 - 2015 President, HSE, Marketing and Technology
2011 - 2013 Chief Marketing Officer
2010 - 2011 President, Marketing
2009 - 2010 Marketing Director, Petroleum
2006 - 2009 Marketing Director, Energy and Freight
2005 - 2006 Vice President, Energy Coal Marketing
2003 - 2004 Vice President, Energy Coal Business Development
2001 - 2003 Vice President, Business Development, BMA (secondment)
1990 - 2001 Mitsubishi Corporation
Summary of proposed terms of employment for Mike Henry
Mike Henry - Chief Executive Officer, BHP
1. Term
Mr Henry will be employed under a single employment agreement
with the BHP Group with no fixed term. The contract is applicable
with effect from the date of Mr Henry's appointment as Chief
Executive Officer (CEO) on 1 January 2020. Mr Henry's performance
and remuneration will be reviewed at the end of each financial
year.
The Group retains the right to terminate the contract by giving
12 months' notice or by making payment in lieu of notice of 12
months' base salary plus the relevant contribution to a
superannuation or pension scheme. Mr Henry would also be entitled
to any accrued entitlements such as earned but untaken leave. Mr
Henry has a right to terminate the contract by giving 12 months'
notice.
2. Fixed Salary and Retirement Benefits
Mr Henry will be paid a base salary of US$1,700,000 per
annum.
He will be entitled to an additional sum equal to 10 per cent of
base salary (which at the commencement of the contract will be
US$170,000 per annum) which he may:
- pay into a superannuation or pension scheme;
- defer receipt of until retirement under the retirement savings plan; and / or
- take as a cash payment in lieu of retirement benefits.
Where Mr Henry elects to allocate the retirement contribution to
a superannuation or pension scheme, or the retirement savings plan,
the rules of the relevant plans will apply.
3. Benefits
Mr Henry will receive additional benefits including the cost of
health, life and disability insurance, business related spouse /
partner travel, and the preparation of multi-jurisdictional
taxation returns.
4. Incentive arrangements
Mr Henry is eligible to participate in incentive arrangements
offered by BHP from time to time. Initially, Mr Henry will
participate in the Cash and Deferred Plan (CDP) and the Long Term
Incentive Plan (LTIP). The CDP and LTIP are part of BHP's
remuneration policy which was approved by shareholders at the 2019
Annual General Meetings.
CDP
Under the rules of the CDP, Mr Henry is entitled to incentive
awards calculated by reference to his base salary. For performance
at the target level, which requires Mr Henry to meet the rigorous
performance hurdles set by the Board, including delivery of the
budget, Mr Henry would receive a cash bonus worth 80 per cent of
base salary. For performance at the maximum level, Mr Henry would
receive a cash bonus of 120 per cent of base salary. Two tranches
of deferred shares will be awarded to Mr Henry, each to the
equivalent value of the actual cash bonus received. These two
tranches of deferred shares will vest in two years and five years,
respectively.
The grant of deferred shares will be subject to the approval of
shareholders where required by applicable listing rules.
LTIP
Long-term incentives are issued under the terms of the LTIP. The
number of LTIP awards allocated will be, on a face value basis, a
maximum of 200 per cent of Mr Henry's base salary, and based on the
12-month average share price and exchange rate up to and including
the 30 June preceding the date of grant. LTIP awards are subject to
performance hurdles, which are measured five years after the
effective date of the grant. Performance hurdles are not subject to
re-testing.
The performance hurdle requires BHP's total shareholder return
(TSR) over a five-year performance period to be measured against
the TSR of a sector peer group (67 per cent of awards) and the TSR
of a global company index (33 per cent of awards). No LTIP awards
vest if BHP's TSR is below the relevant comparator group TSR and
the LTIP awards will be forfeited. 25 per cent of LTIP awards vest
if BHP's TSR is at the relevant comparator group TSR. For all LTIP
awards to vest, BHP's TSR must be at or above the 80(th) percentile
TSR of the relevant comparator group. For performance between the
relevant comparator group TSR and the 80(th) percentile TSR of the
relevant comparator group, vesting occurs on a sliding scale.
The grant of LTIP awards will be subject to the approval of
shareholders where required by applicable listing rules.
Dividends
A dividend equivalent payment (DEP) is provided on vested CDP
deferred shares and vested LTIP awards. No payment is made in
respect of unvested or lapsed CDP deferred shares and LTIP awards.
DEPs are paid in the form of shares.
Entitlements on termination
The rules of the CDP and LTIP and BHP's remuneration policy
provide that where employment is terminated by the resignation of
the executive, or by the Group for cause, Mr Henry is not entitled
to any cash incentive for the year in question and all CDP deferred
shares or LTIP awards will lapse.
If Mr Henry retires or his employment terminates by mutual
agreement:
- He may, at the Remuneration Committee's discretion, be
considered for a pro rata incentive under the CDP for the period of
service during that year based on performance;
- CDP two-year deferred shares would vest in full on the original vesting date;
- CDP five-year deferred shares would vest on the original
vesting date, with the number of deferred shares to vest reduced
pro rata to reflect the period of service; and
- He would have a right to retain entitlements to LTIP awards,
which would vest on the original vesting date, only if, and to the
extent, the performance hurdles are ultimately met. The number of
entitlements Mr Henry would be permitted to retain would be reduced
pro rata to reflect the period of service.
Special provisions relate to events described as
"uncontrollable" such as death and serious injury. In those
circumstances, all of the CDP deferred shares and LTIP awards that
have been awarded but which have not vested or are not exercisable
vest immediately to and / or become immediately exercisable by Mr
Henry or his estate.
5. Minimum shareholding requirement (MSR)
The Board and Remuneration Committee has determined that during
his term as CEO, Mr Henry will be required to hold BHP securities
with a value at least equal to five times one year's pre-tax
(gross) base salary. The value of the securities for the purposes
of this requirement is the market value of the underlying shares.
Unvested awards do not qualify.
The CEO is expected to grow his holdings to the MSR from the
scheduled vesting of his employee awards over time. The MSR is
tested at the time that shares are to be sold. Shares may be sold
to satisfy tax obligations arising from the granting, holding,
vesting, exercise or sale of the employee awards or the underlying
shares whether the MSR is satisfied at that time or not.
Effective 1 July 2020, a two-year post-retirement shareholding
requirement for the CEO will apply from the date of retirement,
which will be the lower of the CEO's MSR or the CEO's actual
shareholding at the date of retirement.
6. Leave entitlements
Mr Henry will be entitled to the following leave
entitlements:
- Annual leave - in accordance with applicable Australian law, currently four weeks per annum.
- Other leave - in accordance with applicable law.
7. Post-employment restraints
Mr Henry will be subject to non-competition and non-solicitation
restraints that operate for 12 months after the cessation of his
employment.
Summary of terms of retirement for Andrew Mackenzie
1. Fixed remuneration
Andrew Mackenzie will continue to be employed by the Company
until 30 June 2020 under the terms of the 2019 remuneration policy.
The Company will pay him a salary, make pension contributions and
provide usual other minor benefits until then. His base salary is
US$1,700,000 per annum and pension contributions are 25 per cent of
salary for FY2020. Upon retiring, Mr Mackenzie will be entitled to
receive the accumulated value of funds under relevant pension
plans, together with the value of any accrued leave.
2. Severance payment
Mr Mackenzie will receive no severance payment, and no payment
in lieu of notice.
3. Incentive arrangements
Mr Mackenzie's entitlements under the Cash and Deferred Plan
(CDP), Short Term Incentive Plan (STIP) and Long Term Incentive
Plan (LTIP) are governed by the shareholder-approved remuneration
policy, applicable plan rules and the Group's leaving entitlements
policy as approved by shareholders at the 2017 Annual General
Meetings.
CDP
In relation to the FY2020 year, Mr Mackenzie will serve as CEO
for six months. He will be considered for a bonus under the CDP at
the end of the year (i.e. for the year ended 30 June 2020). Whether
any bonus will be paid, and the amount, will be determined by the
Remuneration Committee after an assessment of the Company's and his
personal performance after the year end. Accordingly, the awards
made under the CDP are "at-risk". Any amount assessed as payable
will be reported in the Remuneration Report that will be published
in September. This is consistent with the remuneration policy as
approved by shareholders, and the established practice of the
Company.
Even though he will be serving as an employee for the full
FY2020 financial year, he will not receive any payment under the
CDP for the last six months. While the CDP does allow the
Remuneration Committee the discretion to make such a payment, in
this case the Remuneration Committee will not be using that
discretion.
STIP
Under the rules of the STIP, unvested deferred shares are
transferred to a retiring executive on the originally scheduled
vesting date.
LTIP
Mr Mackenzie is a participant in the LTIP approved by
shareholders. The LTIP requires BHP to materially outperform the
comparator groups' Total Shareholder Return (TSR) for all the
awards to vest. The performance hurdles are stretching and ensure
alignment with shareholders. Accordingly, the awards made under the
LTIP are "at-risk", and the actual value of any LTIP awards may
ultimately be zero. The Remuneration Committee reviews performance
and takes advice from its independent adviser before making any
decisions about vesting. Importantly, even if the performance
hurdle is met the Committee conducts a holistic performance review
at vesting time and has an overriding discretion under the plan
rules to reduce the amount of shares that vest.
Under the terms of the LTIP, employees who retire are entitled
to hold awards granted previously. However, the number of awards is
reduced to reflect the period of service in relation to each grant.
They will vest only if the performance hurdle is met, and the
Remuneration Committee confirms vesting, at the expiration of the
term. The actual value of the LTIP awards may ultimately be
zero.
Mr Mackenzie's awards from 2015, 2016, 2017, 2018 and 2019 will
therefore be pro-rated according to the rules of the plan and in
each case must be held for the full five years from the date of
grant (see the table below).
4. Outstanding Share Awards
A. STIP awards
The table below provides details of the STIP awards which will
be unvested at the time of Mr Mackenzie's departure. These shares
represent half of the bonus paid under the STIP for FY2018 and
FY2019 as approved by shareholders. They must be held for two
years, which expire in 2020 and 2021, respectively.
Award Original Estimated Vesting Outcome Awards to
No of Awards Vesting Date Vest
STIP FY2018 52,061 Aug-20 100% 52,061
-------------- -------------- ---------------- ----------
STIP FY2019(1) 25,430 Aug-21 100% 25,430
-------------- -------------- ---------------- ----------
Total 77,491 100% 77,491
-------------- -------------- ---------------- ----------
1. An estimate is shown, and the final grant number is subject
to the actual share price and exchange rate at the date of grant,
in accordance with the shareholder approval received at the 2019
AGMs.
B. LTIP awards
The table below provides details of the LTIP awards that may
vest in the five years after Mr Mackenzie's departure.
As noted above, under the terms of the LTIP, employees who
retire are entitled to hold awards granted prior to retirement.
However, the number of awards is reduced to reflect the period of
elapsed employment service in relation to each grant. The pro-rata
rule of the LTIP will therefore impact the number of awards Mr
Mackenzie retains on departure. To determine the award Mr Mackenzie
will retain on departure, each individual award needs to be
calculated on a pro-rata basis according to the time worked over
the five year performance period (e.g. if Mr Mackenzie had been
employed for half of the five year performance period then he would
retain half the awards). The details of the awards Mr Mackenzie
will retain are set out below.
Whether the awards vest will depend on BHP's relative TSR
performance over the five-year periods to 30 June 2020, 2021, 2022,
2023 and 2024, respectively. In addition, even if the performance
hurdle is met the Remuneration Committee conducts a holistic
performance review at vesting time and has an overriding discretion
under the plan rules to reduce the amount of awards that vest.
Accordingly, the vesting outcome and the number of LTIP awards that
will vest is unknown at this time.
Award Original Awards Pro-Rated Estimated Estimated Estimated
No of Awards to Lapse Awards Vesting Vesting Awards
on Retirement Retained Date Outcome to Vest
on Retirement
LTIP 2015 339,753 - 339,753 Aug-20 Unknown Unknown
LTIP 2016 339,753 67,951 271,802 Aug-21 Unknown Unknown
LTIP 2017 385,075 154,030 231,045 Aug-22 Unknown Unknown
LTIP 2018 304,523 182,714 121,809 Aug-23 Unknown Unknown
LTIP 2019 271,348 217,079 54,269 Aug-24 Unknown Unknown
-------------- --------------- --------------- ---------- ---------- ----------
Total 1,640,452 621,774 1,018,678
-------------- --------------- --------------- ----------
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