Even as the mining giants implement a raft of cost saving measures, it has been revealed BHP Billiton chief’s pay packet is 200 times more than the average Australian.
It was six or seven times more in the beginning of the 1980s.
That’s the conclusion of research that looked at BHP records dated as far back as 1887 to find the long-term patterns in Australian executive salaries, , the SMH reported.
“What we see is a relatively high ratio of BHP chief executive salary to Australian earnings at the turn of the 20th century, around 50 times average earnings, slowly dropping throughout the century, save for a spike in the Second World War,” Melbourne University economist Mike Pottenger said.
“Then with the arrival of Paul Anderson as chief executive in 1998 there’s a vertical jump. He was paid ore than 200 times average earnings.”
“Anderson was the first internationally sourced chief executive since the very first, William Patton, who was hired for £4000 in 1887. Anderson’s successors, Brian Gilbertson, Chip Goodyear, Marius Kloppers and Andrew Mackenzie, have all earned about 200 times the average – it has become the new normal.”
Even after taking a 25 per cent salary cut, Mackenzie, who became the head of BHP last month, can still take home a maximum of $US12.58 million a year if BHP does well.
Pottenger teamed with BHP historian Geoffrey Blainey and inequality researcher Andrew Leigh, who is now a Labor member of Federal Parliament.
He compiled a series of possible salaries between 1887 and 1984 based on the few internal memos that revealed salaries, and the known relationship between the CEO’s salary and BHP’s director fees.
He looked at executive salaries stated in BHP annual reports from 1987 onwards and later the total salaries including stock options and incentives.
“At all times our estimates have been conservative,” Pottenger said.
“If critics want us to exclude the incentives and options, we are happy to point out that without them the CEO’s salary is still 100 times the average – roughly double its previous peak and far higher than anything thought possible during the 1970s and 1980s.”
Egan Associates’ data on average CEO pay packets at Australia’s top 100 companies for the last few decades indicate BHP’s trend is not new.
“In BHP’s case, the merge with Billiton near the turn of this century made it a truly global company,” Pottenger said.
“Also just before the merger there was an air of desperation in the company. Its 1999 annual report was titled ‘Under Pressure’, the 2000 report was titled ‘Coming out of a tight corner’.”
He added companies like BHP that have recently been globalised ‘all want to hire a chief executive who is better than the global median’.
“The only way to do that is to bid up salaries,” Pottenger said.