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The Board of BHP today announced that Andrew Mackenzie’s retirement date will be 31 March 2020, three months earlier than previously announced on 14 November 2019. The Board, Mr Mackenzie and Mr Henry are confident that the CEO transition is proceeding well and ahead of schedule, with Mike Henry assuming the role of Chief Executive Officer from 1 January 2020, as previously announced.

Mr Mackenzie’s retirement arrangements are summarised in the attached schedule.

Summary of revised terms of retirement for Andrew Mackenzie

1. Fixed remuneration

Andrew Mackenzie will continue to be employed by the Company until 31 March 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 Mr Mackenzie will be serving as an employee for nine months of the FY2020 financial year, he will not receive any payment under the CDP for the last three months of that period. 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 No of Awards

Estimated Vesting Date

Vesting Outcome

Awards to Vest

STIP FY2018

52,061

Aug-20

100%

52,061

STIP FY2019

25,845

Aug-21

100%

25,845

Total

77,906

100%

77,906

 

 

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 thus 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 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 No of Awards

Awards to Lapse on Retirement

Pro-Rated Awards Retained on Retirement

Estimated Vesting Date

Estimated Vesting Outcome

Estimated Awards to Vest

LTIP 2015

339,753

16,988

322,765

Aug-20

Unknown

Unknown

LTIP 2016

339,753

84,938

254,815

Aug-21

Unknown

Unknown

LTIP 2017

385,075

173,284

211,791

Aug-22

Unknown

Unknown

LTIP 2018

304,523

197,940

106,583

Aug-23

Unknown

Unknown

LTIP 2019

271,348

230,646

40,702

Aug-24

Unknown

Unknown

Total

1,640,452

703,796

936,656


 

 
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