Wrap Text
Mike Henry to become BHP Chief Executive Officer effective 1 January 2020
BHP Group Plc
Registration number 3196209
Registered in England and Wales
Share code: BHP
ISIN: GB00BH0P3Z91
NEWS RELEASE
Release Time IMMEDIATE
Date 14 November 2019
Release Number 22/19
Mike Henry to become BHP Chief Executive Officer, effective 1 January 2020
The Board of BHP today announced that Mike Henry has been appointed Chief
Executive Officer (CEO) of BHP, following a thorough succession process.
Mr Henry will assume the role of CEO and Executive Director effective 1 January
2020, replacing Andrew Mackenzie who will retire as CEO on 31 December 2019.
Mr Henry has 30 years’ experience in the global mining and petroleum industry,
spanning operational, commercial, safety, technology and marketing roles. He was
appointed to his current role of President Operations Minerals Australia in 2016, and
has been a member of the Executive Leadership Team since 2011.
Mr Henry joined BHP in 2003, initially in business development and then in marketing
and trading of a range of mineral and petroleum commodities based in The Hague,
where he was also accountable for BHP’s ocean freight operations. He went on to
hold various positions in the Company, including President Coal, President HSE,
Marketing and Technology, and Chief Marketing Officer. Prior to joining BHP,
Mr Henry worked in the resources industry in Canada, Japan and Australia.
Chairman Ken MacKenzie said: “Mike Henry’s deep operational and commercial
experience, developed in a global career spanning the Americas, Europe, Asia and
Australia, is the perfect mix for our next CEO. I am confident his discipline and focus
will deliver a culture of high performance and returns for BHP. Mike has been a
strong advocate for the industry, driving higher standards of safety and a commitment
to our local communities and global stakeholders.
“We would like to recognise the outstanding contribution of Andrew Mackenzie to
BHP as CEO. Under his leadership, BHP has transformed into a simpler and more
productive company, financially strong and sharply focused on value for
shareholders. We thank him for his vision and hard work, which has changed the way
we operate and engage with the world.”
Outgoing CEO Andrew Mackenzie said: “It has been a privilege to serve as CEO of
BHP. Our products are essential to global economic development and we deliver
them in a way that creates significant value, for our shareholders, our employees,
communities, nations and the world. BHP is in a good position. We have a simple
portfolio, a strong balance sheet and options to grow value and returns for decades
to come.
“Fresh leadership will deliver an acceleration in the enormous potential for value and
returns that will come from BHP’s next wave of transformation. Choosing the right
time to retire has not been an easy decision, however the Company is in a good
position. I am confident Mike and BHP will seize the many opportunities that lie
ahead.”
CEO-Elect Mike Henry, said: “I am honoured and privileged to be appointed as CEO
and to have the opportunity to lead the talented and hard-working people who make
BHP a great company. For more than 130 years, through the ingenuity and
commitment of its people, BHP has delivered shareholder value while successfully
adapting its portfolio, operations and products. Today we are even safer, more
predictable and more focused.
“We will unlock even greater value from our ore bodies and petroleum basins by
enabling our people with the capability, data and technology to innovate and improve.
We must operate safely, with discipline and reduce our impact on the environment.
With the right people and the right culture we will deliver value and strong returns for
shareholders and for all of society.”
Remuneration
Mike Henry’s employment contract will be effective from 1 January 2020.
BHP Chairman Ken MacKenzie said: “This remuneration package is designed to
motivate a high level of performance, and align with our shareholders’ expectations
and community views. The package is consistent with that applied for Andrew
Mackenzie and the remuneration policy approved by shareholders at BHP’s 2019
Annual General Meetings (AGMs). It is broadly consistent with other roles in global
companies with similar global complexity, size and reach, and is reflective of the
CEO’s significant responsibilities. A high proportion of actual remuneration received
will be directly dependent on performance, with 75 per cent of total target
remuneration represented by incentive plans, and only 25 per cent in fixed pay.”
The key components of Mr Henry’s remuneration are:
- A base salary of US$1,700,000 per annum;
- A pension contribution of 10 per cent of base salary;
- A Cash and Deferred Plan (CDP) target cash award opportunity of 80 per cent
of base salary, with two tranches of deferred shares to be awarded, each to
the equivalent value of the actual cash bonus received, vesting in two and five
years respectively (the maximum CDP award is 1.5 times the target award);
and
- A Long Term Incentive Plan (LTIP) award of 200 per cent face value of base
salary (subject to shareholder approval).
Andrew Mackenzie will step down as CEO, a member of the Executive Leadership
Team and an Executive Director of the Company on 31 December 2019, and will
retire from the Group on 30 June 2020. Mr Mackenzie will work through the
applicable notice period and accordingly no severance payment will be made. He will
receive his base salary and pension entitlement to the date of his retirement.
In conjunction with our new remuneration policy recently approved by shareholders,
BHP introduced a requirement effective 1 July 2020 for the CEO to continue to hold
their BHP shares for two years beyond retirement. While this requirement is not
technically applicable to Mr Mackenzie as he will retire on 30 June 2020, to
demonstrate his commitment to and confidence in BHP’s future success, Mr
Mackenzie has voluntarily committed to comply with this post-retirement shareholding
requirement.
Mr Mackenzie’s remuneration will be in accordance with shareholder-approved
arrangements. In summary:
- Any incentive payment under the CDP for FY2020 can only be assessed by
the Remuneration Committee at the end of the financial year;
- That payment will be pro-rated to reflect his period of service as CEO during
FY2020 (namely, 1 July 2019 to 31 December 2019);
- Awards granted in previous years under the LTIP will be pro-rated in
accordance with the Company’s usual practice. They will vest only if the
performance hurdle is met at the end of each five-year performance period;
and
- Mr Mackenzie will be entitled to the value of the pension and superannuation
funds that he has accumulated over his years of service with the Company.
Summaries of the key terms of Mr Henry’s employment contract and Mr Mackenzie’s
retirement arrangements are set out in the attached schedules.
Further information on BHP can be found at: bhp.com
Appendix 1
Mike Henry biography
Mike Henry has been President Operations, Minerals Australia since February 2016.
He has been a member of the Executive Leadership Team since 2011. In his current
capacity, Mr Henry is responsible for BHP’s iron ore, coal, copper and nickel assets
in Australia, leading nearly 40,000 people across six assets, with revenues of US$29
billion, EBITDA of US$16 billion and capital spend of US$3 billion.
Under his leadership, there has been a 60% reduction in the frequency of high
potential injuries in Minerals Australia. BHP has become the lowest cost major iron
ore producer in the world. A turnaround of Nickel West led to the decision to return
the business to core in the BHP portfolio. He has delivered major capital projects,
including South Flank, at half the capital intensity of prior major projects in West
Australian Iron Ore, and has implemented BHP’s first full-scale autonomous haulage
system at Jimblebar.
In his current capacity, Mr Henry has designed and implemented a BHP-wide
operating system and the Maintenance and Engineering Centre of Excellence, which
has delivered material cost savings and improved uptime across key classes of
equipment. He has established a new employment model and approach to skills
building in Australia through Operations Services. Mr Henry is a committed advocate
for the industry and, in 2018, was part of the Federal Government's Resources 2030
Taskforce.
Mr Henry is a champion of diversity. Over the past three years under his leadership,
BHP’s Minerals Australia business has nearly doubled its number of female
employees, and increased indigenous employment from 4.1 to 5 per cent.
Mr Henry has previously held roles accountable for health, safety and environment,
technology, capital projects, supply, logistics and marketing and trading. His 30-year
resources career has spanned four continents and all of BHP’s commodities. He has
led teams in 18 countries.
Mr Henry is Vice Chair of the Minerals Council of Australia.
He was born in Canada, holds a Bachelor of Science (Chemistry) from the University
of British Columbia and lives in Melbourne with his wife of 30 years. He and his wife
have two adult daughters who live in Canada.
Career history
2016 – present President Operations, Minerals Australia
2015 – 2016 President, Coal
2013 – 2015 President, HSE, Marketing and Technology
2011 – 2013 Chief Marketing Officer
2010 – 2011 President, Marketing
2009 – 2010 Marketing Director, Petroleum
2006 – 2009 Marketing Director, Energy and Freight
2005 – 2006 Vice President, Energy Coal Marketing
2003 – 2004 Vice President, Energy Coal Business Development
2001 – 2003 Vice President, Business Development, BMA (secondment)
1990 – 2001 Mitsubishi Corporation
Summary of proposed terms of employment for Mike Henry
Mike Henry – Chief Executive Officer, BHP
1. Term
Mr Henry will be employed under a single employment agreement with the BHP
Group with no fixed term. The contract is applicable with effect from the date of Mr
Henry’s appointment as Chief Executive Officer (CEO) on 1 January 2020. Mr
Henry’s performance and remuneration will be reviewed at the end of each financial
year.
The Group retains the right to terminate the contract by giving 12 months’ notice or
by making payment in lieu of notice of 12 months’ base salary plus the relevant
contribution to a superannuation or pension scheme. Mr Henry would also be entitled
to any accrued entitlements such as earned but untaken leave. Mr Henry has a right
to terminate the contract by giving 12 months’ notice.
2. Fixed Salary and Retirement Benefits
Mr Henry will be paid a base salary of US$1,700,000 per annum.
He will be entitled to an additional sum equal to 10 per cent of base salary (which at
the commencement of the contract will be US$170,000 per annum) which he may:
- pay into a superannuation or pension scheme;
- defer receipt of until retirement under the retirement savings plan; and / or
- take as a cash payment in lieu of retirement benefits.
Where Mr Henry elects to allocate the retirement contribution to a superannuation or
pension scheme, or the retirement savings plan, the rules of the relevant plans will
apply.
3. Benefits
Mr Henry will receive additional benefits including the cost of health, life and disability
insurance, business related spouse / partner travel, and the preparation of multi-
jurisdictional taxation returns.
4. Incentive arrangements
Mr Henry is eligible to participate in incentive arrangements offered by BHP from time
to time. Initially, Mr Henry will participate in the Cash and Deferred Plan (CDP) and
the Long Term Incentive Plan (LTIP). The CDP and LTIP are part of BHP’s
remuneration policy which was approved by shareholders at the 2019 Annual
General Meetings.
CDP
Under the rules of the CDP, Mr Henry is entitled to incentive awards calculated by
reference to his base salary. For performance at the target level, which requires Mr
Henry to meet the rigorous performance hurdles set by the Board, including delivery
of the budget, Mr Henry would receive a cash bonus worth 80 per cent of base
salary. For performance at the maximum level, Mr Henry would receive a cash bonus
of 120 per cent of base salary. Two tranches of deferred shares will be awarded to
Mr Henry, each to the equivalent value of the actual cash bonus received. These two
tranches of deferred shares will vest in two years and five years, respectively.
The grant of deferred shares will be subject to the approval of shareholders where
required by applicable listing rules.
LTIP
Long-term incentives are issued under the terms of the LTIP. The number of LTIP
awards allocated will be, on a face value basis, a maximum of 200 per cent of Mr
Henry’s base salary, and based on the 12-month average share price and exchange
rate up to and including the 30 June preceding the date of grant. LTIP awards are
subject to performance hurdles, which are measured five years after the effective
date of the grant. Performance hurdles are not subject to re-testing.
The performance hurdle requires BHP's total shareholder return (TSR) over a five-
year performance period to be measured against the TSR of a sector peer group (67
per cent of awards) and the TSR of a global company index (33 per cent of awards).
No LTIP awards vest if BHP’s TSR is below the relevant comparator group TSR and
the LTIP awards will be forfeited. 25 per cent of LTIP awards vest if BHP’s TSR is at
the relevant comparator group TSR. For all LTIP awards to vest, BHP's TSR must be
at or above the 80th percentile TSR of the relevant comparator group. For
performance between the relevant comparator group TSR and the 80 th percentile
TSR of the relevant comparator group, vesting occurs on a sliding scale.
The grant of LTIP awards will be subject to the approval of shareholders where
required by applicable listing rules.
Dividends
A dividend equivalent payment (DEP) is provided on vested CDP deferred shares
and vested LTIP awards. No payment is made in respect of unvested or lapsed CDP
deferred shares and LTIP awards. DEPs are paid in the form of shares.
Entitlements on termination
The rules of the CDP and LTIP and BHP’s remuneration policy provide that where
employment is terminated by the resignation of the executive, or by the Group for
cause, Mr Henry is not entitled to any cash incentive for the year in question and all
CDP deferred shares or LTIP awards will lapse.
If Mr Henry retires or his employment terminates by mutual agreement:
- He may, at the Remuneration Committee’s discretion, be considered for a pro
rata incentive under the CDP for the period of service during that year based
on performance;
- CDP two-year deferred shares would vest in full on the original vesting date;
- CDP five-year deferred shares would vest on the original vesting date, with the
number of deferred shares to vest reduced pro rata to reflect the period of
service; and
- He would have a right to retain entitlements to LTIP awards, which would vest
on the original vesting date, only if, and to the extent, the performance hurdles
are ultimately met. The number of entitlements Mr Henry would be permitted
to retain would be reduced pro rata to reflect the period of service.
Special provisions relate to events described as “uncontrollable” such as death and
serious injury. In those circumstances, all of the CDP deferred shares and LTIP
awards that have been awarded but which have not vested or are not exercisable
vest immediately to and / or become immediately exercisable by Mr Henry or his
estate.
5. Minimum shareholding requirement (MSR)
The Board and Remuneration Committee has determined that during his term as
CEO, Mr Henry will be required to hold BHP securities with a value at least equal to
five times one year’s pre-tax (gross) base salary. The value of the securities for the
purposes of this requirement is the market value of the underlying shares. Unvested
awards do not qualify.
The CEO is expected to grow his holdings to the MSR from the scheduled vesting of
his employee awards over time. The MSR is tested at the time that shares are to be
sold. Shares may be sold to satisfy tax obligations arising from the granting, holding,
vesting, exercise or sale of the employee awards or the underlying shares whether
the MSR is satisfied at that time or not.
Effective 1 July 2020, a two-year post-retirement shareholding requirement for the
CEO will apply from the date of retirement, which will be the lower of the CEO’s MSR
or the CEO’s actual shareholding at the date of retirement.
6. Leave entitlements
Mr Henry will be entitled to the following leave entitlements:
- Annual leave – in accordance with applicable Australian law, currently four
weeks per annum.
- Other leave – in accordance with applicable law.
7. Post-employment restraints
Mr Henry will be subject to non-competition and non-solicitation restraints that
operate for 12 months after the cessation of his employment.
Summary of terms of retirement for Andrew Mackenzie
1. Fixed remuneration
Andrew Mackenzie will continue to be employed by the Company until 30 June 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 he will be serving as an employee for the full FY2020 financial year, he
will not receive any payment under the CDP for the last six months. 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.
Original No of Estimated Vesting
Award Awards to Vest
Awards Vesting Date Outcome
STIP FY2018 52,061 Aug-20 100% 52,061
STIP FY2019(1) 25,430 Aug-21 100% 25,430
Total 77,491 100% 77,491
(1) An estimate is shown, and the final grant number is subject to the actual share price and exchange rate at the date of
grant, in accordance with the shareholder approval received at the 2019 AGMs.
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 therefore 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 Remuneration 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.
Pro-Rated
Awards to Estimated Estimated Estimated
Original No Awards
Award Lapse on Vesting Vesting Awards to
of Awards Retained on
Retirement Date Outcome Vest
Retirement
LTIP 2015 339,753 - 339,753 Aug-20 Unknown Unknown
LTIP 2016 339,753 67,951 271,802 Aug-21 Unknown Unknown
LTIP 2017 385,075 154,030 231,045 Aug-22 Unknown Unknown
LTIP 2018 304,523 182,714 121,809 Aug-23 Unknown Unknown
LTIP 2019 271,348 217,079 54,269 Aug-24 Unknown Unknown
Total 1,640,452 621,774 1,018,678
Sponsor: UBS South Africa (Pty) Limited
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Date: 14/11/2019 07:05:00
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