How $55M could leave a CEO feeling underpaid

Andrew Mackenzie only pocketed $55m for his six-and-half year stint at the helm of BHP while his successor Mike Henry has already notched up $28m for 18 months in the top job.

BHP CEO Mike Henry. Picture: Colin Murty/The Australian

Boy, if anyone’s got a serious beef about having been underpaid, it’s gotta be Andrew Mackenzie, the former CEO of Australia’s biggest company BHP.

In his six and a half years he trousered only $US40m in total - or around $55m at the current exchange rate.

In contrast, his predecessor Marius Kloppers took home double that, $US80m, or $110m at today’s exchange rate, over his shorter term, five and a half years.

And Mackenzie’s successor, Mike Henry has already totted up just over $US20m or $28m for just one and a half years at the top, since February last year.

But the raw deal for Mackenzie was actually worse than these numbers suggest

He had to tidy up the mess left by Kloppers from BHP’s plunge into US shale oil.

You would sort of think that the guy who got BHP out of shale oil, both minimising the capital losses and stopping the ongoing haemorrhaging, might have got a bigger pay cheque than the guy who took it into shale and cost shareholders something north of $US20bn.

And note, that’s ‘b’ for billion – not exactly petty cash even for a BHP. And note also, that while Kloppers as CEO might have driven the move into shale, the decision was ultimately signed off by the BHP board.

Former BHP CEO Andrew Mackenzie. Picture: Aaron Francis/The Australian

Yet in his time at the top Mackenzie never got an annual pay cheque greater than $US10m – the only time he came even close was in this first year.

While in his time at the top Kloppers never got an annual pay cheque lower than $US10m – except for his first – half- year in the job.

Further, Mackenzie didn’t just oversee cleaning up the shale oil mess, he and his CFO Peter Beaven – and, to be fair, also Henry – built the BHP that was able to report that mammoth $18bn bottom-line after-tax profit for 2020-21.

Mackenzie and Beaven did two major things.

The big one was to refocus BHP on iron ore; to chase down the gap it had always had to Rio Tinto; and to ruthlessly and dramatically drive down costs (as all three, including Fortescue, were doing).

BHP CEO Mike Henry. Picture: Colin Murty/The Australian

When Mackenzie became CEO, BHP’s iron ore operating profit was $US11bn. In this latest year it was $US24bn.

The other major thing the duo did was wring out revenues and profit from what they called BHP’s latent production capacity – increased output from existing assets.

All of which has set Henry up for whatever he plans to do – which he told us, of course: get BHP out of oil and gas and into potash

Now, there was another ‘contributor’ of course to BHP’s good fortune. It’s called ‘China’ – and its voracious demand for Pilbara iron ore, so it can go about pumping ever-increasing volumes of CO2.

China doesn’t just underwrite BHP’s – and Rio’s and Fortescue’s and the private Gina Rinehart’s – prosperity; it also underwrites Australia’s.

Last year, we got nearly 10 per cent of our entire GDP from selling iron ore – most of which goes to China and with the price set by China’s demand, whether or not it’s the buyer.

For how much longer, one might ask, and I certainly do.

Does the Chinese leadership really want to keep us in a life-style we haven’t really earned but we’ve come to take for granted, when at the same time it’s no longer our national ‘new best friend’?

Which raises a very interesting question: will – or should it be, when – does Rio follow BHP in abandoning its dual-listing?

And in its case does it locate in London or Melbourne? London Stock Exchange or ASX?

It has to be Melbourne/ASX as that’s a no-brainer for both its Australian and British holders – especially the British ones – and the share price moves since BHP announced suggest that outcome.

Originally published as How $55M could leave a CEO feeling underpaid