Comprehensive Report: BHP Billiton Remuneration Committee Analysis

This report provides an analysis of BHP Billiton's remuneration practices, focusing on the company's remuneration committee and its role in determining executive compensation. The report examines the structure of the remuneration, including Short-Term Incentives (STI) and Long-Term Incentives (LTI), and how these components are linked to both financial and non-financial performance metrics. It highlights the importance of aligning remuneration with organizational objectives and shareholder value, emphasizing the role of the remuneration committee in ensuring fair and effective compensation. The report also discusses the significance of fixed remuneration, performance-based pay, and the overall impact of the compensation strategy on employee motivation and company performance. The analysis draws on BHP's annual report and other sources to provide insights into the company's approach to executive remuneration, its alignment with corporate strategy, and its impact on financial outcomes. The report concludes that BHP has established a sound compensation scheme that provides a balanced view and contributes to long-term benefits.

Executive Summary
BHP has appropriately disclosed the remuneration disclosure needs in the annual report.
From the annual report and the discussion, it is clear that the remuneration committee of the
company was appropriate in nature and that it has catered to the requirements of the
shareholders. The view has been backed up by the consultation of the shareholders. Further,
the remuneration committee continues to strive for the outcome of the remuneration that
reflects the performance.
Introduction
The remuneration part is one of the vital prospects of the company that determines the
workforce stability. Compensation can be termed as a tricky game and in order to attract good
management, it is the need of the hour. In this report, the major consideration is on the
remuneration and remuneration committee of BHP Billiton. It is the main aim of the
organization to offer competitive market awards and thereafter, ensure payment so that the
most professional and quality rich individuals can be encouraged and motivated. Further, the
company’s remuneration policy is framed in a way that ensures reward to people whose
individual and collective contribution has resulted in the company’s achievement of
organizational objectives ( Safari et. al, 2016). Nevertheless, the human resource committee of
the company also plays a pivotal role in reviewing the remuneration outcomes and annual
performances so that any contingencies can be avoided in the future.
It is the duty of the board to ascertain the outcomes, as well as targets of the STI after an
ascertainment is done for the external advice. The policy has been decided for all the
employees in the company stressing on the external, as well as internal relativities. Further, it
plays a leading role in the depiction of the individual and business performance that pertains
to the current year. On the other when it comes to the perspective of fixed remuneration it is
offered by BHP as cash and other benefits in terms of cash (BHP Billiton Ltd, 2017). In addition,
these are assessed on a yearly basis by the company depending on the performance, expertise,
and experience. Further, for every position, there is a remuneration that is fixed and needs to
be delivered by the company where it operates.
STI
The company’s remuneration for its executives and CEO consists of fixed and remuneration
at-risk. It consists of three major components that are STI, LTI, and fixed remuneration.
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Besides, the prevalence of at-risk segments is interrelated with the company’s performance in
contrast to both non-financial and financial measures (Safari et. al, 2016).
Short-term incentives- Both the CFO and the CEO of the company pursue a target STI that
must be equivalent as their remuneration which remains fixed in nature. Further, the
outcomes of such STI depict the executives’ performance through a balanced scorecard basis
and overall company performance as well (BHP Billiton Ltd, 2017). Such outcomes are
provided betwixt 0-150% of the CEO’s and executives’ STI depending upon their
performance. The short term incentives must be based upon the performance that leads to a
better projection of the compensation. Executives attain half of such payments as cash
whereas the remaining remains deferred for one year. This helps in proper planning and
growth and aims at attaining balanced structure.
Recommendation
STI influences and sets the focus on the efforts of the CEO when it comes to the delivery of
the strategic priorities of the group for the specific year and this helps the CEO to enhance the
objectives of the performance. It is thereby recommended that the company should choose
the performance measures that are apt for the functioning. Moreover, the pay must be in
connection with the policies of the organization because it will help in influencing the
employee to work and aims at the results. Therefore, it is of utmost importance that the
performance measures for each must be selected to have a huge short-term and long-term
impact on the company. Going by the profile of BHP it can be commented that it has long-
term focus in view and that must be aligned with the shareholders when the remuneration part
is aligned with the objectives. BHP has effectively aligned its strategy with the remuneration
part and hence, been able to attain a balanced structure.
Conclusion
It shows the relationship between executive remuneration, their performances, and
shareholders return value. BHP has effectively laid down a perfect compensation scheme that
provides a balanced view and lead to long term benefits. From the overall discussion, it can
be commented that the financial, as well as individual performance measures, rests upon the
target and relative weightings. The CEO can enhance the performance with the remuneration
part that will lead to wealth creation and builds a strong relationship with the organization.
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The employees can be motivated and influenced to work in a formidable manner when the
compensation part is structured in a better fashion. The financial measures must be selected
by the company in a manner that best suits the organization and matches the budget of the
company. Further, from the annual report of BHP, it can be ascertained that BHP has met all
the requirements and provided a strong remuneration committee that aligns with the
objectives of the organization. Overall, the structure that the BHP follows is in tune to the
policies and the framework of the organization.
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References
BHP Billiton Ltd., 2017. The Annual Report 2017.[Online] Available through
website:<www.bhp.com>[Accessed 24 April 2018].
Safari, M., Cooper, B., and Dellaportas, S., 2016. The Influence of Remuneration Structures on
Financial Reporting Quality: Evidence from Australia. [Online] Available through: EBSCO Databases
website: <https://web.b.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=0&sid=08ed0789-4e92-
4a77-b606-722da7ac3754%40pdc-v-sessmgr01> [Accessed 24 April 2018].
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