In 2013 Andrew Mackenzie was appointed CEO of BHP Group (ASX:BHP). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. After that, we will consider the growth in the business. 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?
Our data indicates that BHP Group is worth AU$176b, and total annual CEO compensation was reported as US$7.9m for the year to June 2019. That's actually a decrease on the year before. While we always look at total compensation first, we note that the salary component is less, 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. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$3.8m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
As you can see, Andrew Mackenzie is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean BHP Group is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see, below, how CEO compensation at BHP Group has changed over time.
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). It achieved revenue growth of 2.8% over the last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Shareholders might be interested in this free visualization of analyst forecasts.
Has BHP Group Been A Good Investment?
Boasting a total shareholder return of 99% over three years, BHP Group has done well by shareholders. 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.
We examined the amount BHP Group pays its CEO, and compared it to the amount paid by other large companies. As discussed above, we discovered that the company pays more than the median of that group.
However we must not forget that the EPS growth has been very strong over three years. On top of that, in the same period, returns to shareholders have been great. As a result of this good performance, the CEO remuneration may well be quite reasonable. Whatever your view on compensation, you might want to check if insiders are buying or selling BHP Group shares (free trial).
Important note: BHP Group may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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.
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. Thank you for reading.