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).
