Increases to BHP Group Limited's (ASX:BHP) CEO Compensation Might Cool off for now

Key Insights

• BHP Group to hold its Annual General Meeting on 30th of October
• CEO Mike Henry's total compensation includes salary of US$1.81m
• The overall pay is 69% above the industry average
• Over the past three years, BHP Group's EPS fell by 12% and over the past three years, the total shareholder return was 54%

Despite strong share price growth of 54% for BHP Group Limited (ASX:BHP) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 30th of October may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Check out our latest analysis for BHP Group

How Does Total Compensation For Mike Henry Compare With Other Companies In The Industry?

According to our data, BHP Group Limited has a market capitalization of AU$214b, and paid its CEO total annual compensation worth US$7.3m over the year to June 2024. This means that the compensation hasn't changed much from last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.8m.

For comparison, other companies in the Australian Metals and Mining industry with market capitalizations above AU$12b, reported a median total CEO compensation of US$4.3m. Accordingly, our analysis reveals that BHP Group Limited pays Mike Henry north of the industry median. What's more, Mike Henry holds AU$17m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2024	2023	Proportion (2024)
Salary	US$1.8m	US$1.7m	25%
Other	US$5.5m	US$5.7m	75%
Total Compensation	US$7.3m	US$7.5m	100%

On an industry level, around 65% of total compensation represents salary and 35% is other remuneration. BHP Group sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at BHP Group Limited's Growth Numbers

Over the last three years, BHP Group Limited has shrunk its earnings per share by 12% per year. Its revenue is up 3.4% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has BHP Group Limited Been A Good Investment?

Most shareholders would probably be pleased with BHP Group Limited for providing a total return of 54% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for BHP Group that investors should think about before committing capital to this stock.

Important note: BHP Group is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.