In 2013 Andrew Mackenzie was appointed CEO of BHP Group (ASX:BHP). First, this article will compare CEO compensation with compensation at other large companies. Next, we’ll consider growth that the business demonstrates. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Andrew Mackenzie’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that BHP Group has a market cap of AU$187b, and reported total annual CEO compensation of US$7.9m for the year to June 2019. That’s below the compensation, last year. We think total compensation is more important but we note that the CEO salary is lower, at US$1.7m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$3.9m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).
Thus we can conclude that Andrew Mackenzie receives more in total compensation than the median of a group of large companies in the same market as BHP Group. However, this doesn’t necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
The graphic below shows how CEO compensation at BHP Group has changed from year to year.
Is BHP Group Growing?
On average over the last three years, BHP Group has grown earnings per share (EPS) by 58% each year (using a line of best fit). In the last year, its revenue is up 2.8%.
This demonstrates that the company has been improving recently. A good result. It’s good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Shareholders might be interested in this free visualization of analyst forecasts.
Has BHP Group Been A Good Investment?
Most shareholders would probably be pleased with BHP Group for providing a total return of 92% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
We examined the amount BHP Group pays its CEO, and compared it to the amount paid by other large companies. Our data suggests that it pays above the median CEO pay within that group.
However we must not forget that the EPS growth has been very strong over three years. Even better, returns to shareholders have been plentiful, over the same time period. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. Whatever your view on compensation, you might want to check if insiders are buying or selling BHP Group shares (free trial).
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.