BHP chief Andrew Mackenzie loses a chunk of his bonus

Fatality, poor performances cost BHP’s Andrew Mackenzie a chunk of his bonus.

BHP is proposing changes to the way Andrew Mackenzie is paid. Picture: Stuart McEvoy

A fatality at a Queensland coal mine and a poor operational performance in sections of BHP Group’s business has cost chief executive Andrew Mackenzie a large portion of his bonus cheque, as his total pay dropped almost a quarter from last financial year.

It comes as BHP said it will propose changes to the way it pays Mr Mackenzie, including alterations to the structure of long-run incentives.

BHP’s annual financial report shows Mr Mackenzie’s “total actual remuneration” fell 24.2 per cent to $US3.53 million in the 2018-19 financial year, down from $US4.66 million the previous year.

A fatality at Queensland’s Saraji coal mine on December 31 last year, when bulldozer rolled over, killing a 49-year-old operator - the cause of which BHP has been unable to determine - was the primary cause of a portion of Mr Mackenzie’s short-term bonus being stripped, the company said.

“The (remuneration) committee took advice from the sustainability committee, giving the group’s safety performance the greatest weighting in the health, safety, environment and community category,” the company said.

“From a performance perspective, while shareholders have benefited during FY2019 from positive share price growth and significant shareholder returns, the year was a challenging one operationally for BHP, and the remuneration outcomes for FY2019 for our senior executives reflect this.”

BHP said its board had again decided to leave Mr Mackenzie’s base pay rate at $US1.7 million a year - the same as it was when he was appointed to the company’s top job in 2013.

Changes proposed by the company include a reduction in Mr Mackenzie’s long-term incentive plan as a proportion of his base salary and a cash award with a longer-term focus than current short term incentives, BHP said.

Those changes would result in a 12 per cent cut to maximum annual remuneration, it said.

Other changes planned include a cut to Mr Mackenzie’s pension contribution rate and the introduction of a two-year post-retirement shareholding requirement.

The miner said it will put proposed remuneration policy changes to investors at annual shareholder meetings in the UK and Australia later in 2019.

“BHP’s board and remuneration committee believe the proposed changes improve our senior executive remuneration arrangements and they will continue to promote long-term value creation,” BHP said in the annual report.

Last year’s runaway train in the Pilbara also costs BHP’s top level of management a portion of their short-term bonuses, with the company citing the incident as one of the factors in failing to reach financial performance targets.

“The key drivers of the underlying attributable profit performance being below threshold at $US8.6 billion were lower volumes at Western Australian iron ore resulting from train derailment impacts, shutdown overruns, and equipment reliability issues at mines and port,” the annual report said.

“At Olympic Dam caused by an acid plant outage; at coal due to prime stripping shortfalls resulting in low raw coal production; at Escondida due to conveyor belt failures, lower mill performance, and unscheduled and extended maintenance; and at Spence due to an electrowinning plant fire; partly offset by higher Petroleum volumes from improved well performance across most fields.”

Even the sharp surge in iron ore prices early this year was not enough to ensure the company’s underlying attributable profit target of $US10.3 billion was met for the financial year.

BHP shares closed at $38.30 on Monday.

With Dow Jones Newswires