Statement re Exe Remuneration
BHP Billiton Limited
31 October 2002
BHP Billiton Limited is issuing this announcement to fulfil disclosure
obligations arising from its secondary listing on the London Stock Exchange.
The text of this release is identical to that issued by BHP Billiton Plc
earlier.
31 October 2002
'For the information of the local market, please find following announcement
filed with the ASX'
There has been considerable public debate in recent weeks about the issue of
executive remuneration.
The remuneration paid to current and former executives of BHP Billiton has
featured in a number of media reports on the subject.
BHP Billiton is asking shareholders to consider new Group Incentive Schemes at
the annual general meeting to be held on Monday next. In addition, shareholders
are being asked to consider and approve the participation in the Schemes by the
executive directors.
We have been contacted by a number of shareholders who have raised concerns
about the items of business dealing with the participation by executive
directors in the proposed Group Incentive Scheme.
We are addressing these concerns as they arise. Our responses do not contain any
information that has not already been disclosed. However, in the interests of
ensuring that all shareholders have an opportunity to see the key points that we
intend to make we are copying the attached letter to the Exchange and lodging it
on our website.
Karen Wood
Company Secretary
31 October 2002
Dear Shareholder
Annual General Meeting
A number of our shareholders have made contact with us to ask questions or raise
concerns about the items of business to be considered at the Annual General
Meeting dealing with proposed new executive incentive arrangements.
As you will recall, these items are motions 16, 17 and 18. Motion 16 asks
shareholders to consider a proposed new Group Incentive Scheme (GIS) which will
replace all existing plans, while motions 17 and 18 deal with the participation
in that GIS by the executive directors - Brian Gilbertson and Chip Goodyear.
As you will be aware the proposed GIS works off past performance; meaning that
the quantum of all long term incentives is based on the performance of the
particular executive, and the Group, in the period just past. Because the GIS
will only commence operation following shareholder approval, there is no past
period against which initial awards can be made. For this reason, the Board
proposed a transitional arrangement for all participants.
The intent behind the transitional arrangement was to put the executive
participants in the same position they would have been in, had the GIS been
operating for the previous year.
Shareholders are being asked to approve the participation in the transitional
arrangements by the executive directors.
In accordance with the Listing Rules, motions 17 and 18 ask shareholders to
approve a cap on the shares that are available (subject to performance) to vest
to the executive directors, at the end of the performance period which is three
years from the commencement of the relevant period - ie. 30 June 2005.
In determining the cap, for which approval is being sought, the Board calculated
the number of shares estimated to be equal to 140% of the executive directors'
annual base salary. 140% assumes maximum performance. The critical issue,
however, is that while the Board had to assume maximum performance, to ensure
there were sufficient shares approved in the event that that level of
performance was met, the number of shares that will actually vest will be
entirely dependent on performance against the designated performance hurdles
(all of which are described in the Notice of Meeting).
The executive directors will only be entitled to the maximum if BHP Billiton's
performance is at or above the 85th percentile of our peer group on total
shareholder return performance and earnings per share growth exceed the
inflationary underpin plus 2% per annum. Needless to say, if BHP Billiton's
performance does meet those hurdles then all shareholders will benefit.
It may assist in your deliberations to see the percentage of base salary that
may accrue to the Chief Executive under the transitional arrangements and under
the proposed GIS, at both the maximum and target levels.
The table below contains maximum awards. It assumes extraordinary performance
against all measures.
Proposed Incentive arrangements - Chief Executive
Incentives Transitional Arrangements at Maximum Proposed Group Incentive Scheme at
Maximum
Short Term Incentive 150%* 105%
Long Term Incentive
Performance Shares 140% Deferred Shares 105%
Performance Shares 105%
Total 290% 315%
* Although the maximum available was 150% the actual paid for FY2002 was 136%.
If target performance is met, the percentage of base salary that may accrue to
the Chief Executive under the transitional arrangements and under the proposed
GIS is set out in the table below.
Proposed Incentive arrangements - Chief Executive
Incentives Transitional Arrangements at Target Proposed Group Incentive Scheme at Target
Short Term Incentive 100% 70%
Long Term Incentive
Performance Shares 105% Deferred Shares 70%
Performance Shares 52.5%
Total 205% 192.5%
At both the target and maximum levels, the percentages available to executive
directors have been substantially reduced from the percentages that are
currently available via existing plans under which shareholders have previously
approved awards.
I want to assure you that the proposed GIS, and the participation in it by Brian
Gilbertson and Chip Goodyear, has been well thought out, firstly by the
Remuneration Committee (which is comprised solely of independent non-executive
directors) and by the Board. It contains performance hurdles that are more
rigorous than those in the existing plans. In devising the GIS we have taken
extensive market data into account and we do not believe that the levels are
excessive. We do believe that it provides the incentives we need to attract and
retain executive talent.
While I appreciate the quite proper concerns that have been raised about
excessive levels of executive remuneration, I believe that it would not be in
the interests of the shareholders of BHP Billiton if these items of business
were not passed.
I commend the GIS, and the participation in the transition arrangements by the
executive directors, to you.
Yours sincerely
D R Argus
Chairman
BHP Billiton Limited ABN 49 004 028 077 BHP Billiton Plc Registration number 3196209
Registered in Australia Registered in England and Wales
Registered Office: 600 Bourke Street Melbourne Victoria Registered Office: 1-3 Strand London WC2N 5HA United Kingdom
3000 Telephone +44 20 7747 3800 Facsimile +44 20 7747 3900
Telephone +61 3 9609 3333 Facsimile +61 3 9609 3015
The BHP Billiton Group is headquartered in Australia
This information is provided by RNS
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