In 2013 Andrew Mackenzie was appointed CEO of BHP Group (ASX:BHP). This analysis aims first to contrast CEO compensation with other large 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. This process should give us an idea about how appropriately the CEO is paid.
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$191b, and is paying total annual CEO compensation of US$8.1m. (This is based on the year to June 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.7m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$4.0m. 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 better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at BHP Group, below.
Is BHP Group Growing?
Over the last three years BHP Group has grown its earnings per share (EPS) by an average of 92% per year (using a line of best fit). In the last year, its revenue is up 17%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. 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 149% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar 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.
Importantly, though, the company has impressed with its earnings per share growth, over three years. Even better, returns to shareholders have been plentiful, over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at BHP Group.
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.