2002 BHP-Billiton AGM Transcript

Speaking about crucial resolutions resolutions 16, 17 and 18

STEPHEN MAYNE: Yes, Chairman, you have the full symphony tonight. It is a shame that we have lost the London link. I must say it is very disappointing the way you have timed this meeting. In Cup eve is just ridiculous. You said to us at 8.20 that "we have a long meeting, it is up to you" hint, hint, keep it short, don't ask too many questions.

DON ARGUS: That is not what I was referring to.

STEPHEN MAYNE: Then the three most controversial resolutions, lo and behold, are 16, 17 and 18. So it is a pretty cynical exercise to have this on Cup eve, and at

DON ARGUS: Why don't you ask the questions.

STEPHEN MAYNE: At one minute to midnight there is going to be no one left and you have the three most controversial resolutions, which many institutions are voting against. The way you have structured it is very, very cynical, I think.

DON ARGUS: That is your view, but why don't you ask the question and we will get those onto the table now so we can get into the resolutions.

STEPHEN MAYNE: Firstly, I would like an undertaking that you are going to show the proxies before each resolution is counted.

DON ARGUS: I will put that to the vote of the shareholders, as I did last year and the shareholders determined that we would do that. If the shareholders say, "We want to do that", then I am quite happy to do that.

STEPHEN MAYNE: Firstly, on the question of board pay, I have to say you have made some excellent initiatives in some areas. I think reducing the size of the board has been an excellent move. You have handled it quite diplomatically in the circumstances. Similarly two elephant stamps for getting rid of the retirement scheme for directors. You want your directors getting paid everything upfront as they go. You don't want balloon payments which act as good behaviour bonds. So full marks for that.

On the question of Mr Anderson's payout, I like the way you have tried to spin this, but the fact of the matter is that and I know your nickname is "Don't Argue", but

DON ARGUS: That was your nickname, Stephen, not mine.

STEPHEN MAYNE: I got that from an institution who dealt with you when you were a banker. The bottom line is that Mr Anderson did get $18 million in total last year. Sure, you have said, it was two years in one. I just think that it is unacceptable, it is the largest ever payout in 12 months to an Australian based executive of an Australian company. You have to accept that, and you have to accept that that looks extremely large. Yes, he came in when the share price was low, he came in at the height of the Asian crisis, we were in the midst of writing off 10 billion, he came in right at the bottom, he did a great job, he was helped by the oil price, a whole range of things

DON ARGUS: No, no, no, he did a great job. Forget about the oil price. Come on now, be fair.

BRIAN GILBERTSON: I could have doubled the oil price.

DON ARGUS: Be fair, Stephen. Come on, you know better than that.

STEPHEN MAYNE: I just think that for the CEO to come in on a five year deal and then three years into it announce a merger where there is a transfer of value, according to brokers like JB Weir, of $5 billion from the BHP shareholders to the Billiton shareholders, the share price sagged and a key part of the deal is that he gets to leave a year early with a complete full payout is completely unacceptable. Then I find it amazing, despite what a great job he has done, that he is going around lecturing people about executive pay being out of control when the most out of control example is this very company and his personal contract.

DON ARGUS: I am sure if I let Paul have the meeting for a half hour he would explain perhaps some of the things that have been said have been misrepresented. But you have made your point

STEPHEN MAYNE: I know how these things work. When you left the NAB you were allowed to keep your options, and then when John Fletcher left Brambles he was allowed to keep his options. I know with these things there are precedents that go around and then you are in a position where it is difficult to argue, but

DON ARGUS: The other difference is that other options are in the money. Mine are out of the money, if you want to check.

STEPHEN MAYNE: Pity about HomeSide. Just a couple of specific question. The first one is HBI. What is the situation specifically with the take or pay gas contract?

I understand that is the key thing which stops us closing HBI, if there is another plant failure or if it goes back into the red. Can you give us a bit more detail on the exact nature of the take or pay contract how long, what the force majeure is in there, if there is in any circumstance a way we can get out of paying El Paso and the other parties to that?

We have announced, I think it was about 12 or 15 months ago, the conclusion to our hedging policies where we are going to go for the natural hedge. Can you tell us how that has worked so far? How much of our product now is hedged like it might have been 40 per cent, is it down to 20 per cent; so how has the unwinding of our hedging policy worked so far?

Has it added value, or has it not worked in our favour?

I personally would like to recommend a policy where you are more flexible on hedging. If the Aussie dollar goes to 45 cents, I would be saying you should be hedging everything with your ears pinned back. But you seem to have adopted a policy which is no hedging no matter what. I would just like your view as to whether you really have shut the book forever on hedging just because every other miner in town has dropped in some cases millions of dollars.

The final question is I know I asked this last year and you did the usual "it is before the course, we can't comment" in terms of the Esso litigation around Longford. This is a specific question that doesn't go to what is in the court. It goes to the agreement between BHP and Esso. If that class action is successful and we get cleaned up or Esso gets cleaned up, do we wear 50 per cent of the judgment, or is there provision in our joint venture contracts whereby Esso, as the managing partner, the operating partner of the joint venture, gets a larger proportion of the pain because they were the people that mismanaged the plant?

Thanks.

DON ARGUS: Let me deal with the Esso thing and I can't deal with it specifically because, as you well know, it is before the courts. But, based on the information we have that we have received from our legal advice, we don't believe that we have a liability going forward.

May I also remind you of the royal commission that occurred here in Melbourne. As you will recall, there was a no adverse finding in favour of BHP out of that particular royal commission. I can't answer it any further than that. With regard to the hedging piece, and I will let Brian deal with the force majeure and the take or pay contracts, we have a very, I suppose, forward model that we use and we use the cash flow at risk. You will see in Brian's targets that he has put out there that we have a limit as to how much cash flow at risk we are prepared to expose. Whilst I don't doubt your ability to run a hedge book, Stephen, I would have to say to you that if you start taking bets on movements of prices or currencies then it is one quick way to go broke, as we have seen in other ways.

So I would have to say to you that we do have a very strong discipline on what we do with hedging. We are not following other institutions. We are looking at risk management across the total spectrum of the group and will continue to do so. We at the board see what cash flow we have at risk at any one time. I will ask Brian to answer the question on the issue of the force majeure, please.

BRIAN GILBERTSON: Thank you, Chairman. Ladies and gentlemen, I can't give a specific answer in detail to the question, to the exact nature and duration of the contracts. The reason for that is that I am assuming, as I have said earlier, that this plant will run successfully. It is up and running at the moment. So the thought of closing it down is not the presumption that we are working on.

I recall the take or pay agreements because at one stage early last year we were looking at the range of alternatives. But the current planning premise which I am briefed we should be confident about is that the plant will continue to operate and we will not need to declare force majeure or close down or take up take or pay contracts.

DON ARGUS: Thanks, Brian.

Motion 18, the performance shares of Charles Goodyear

STEPHEN MAYNE: Chairman, I would like to briefly speak against this resolution and just simply put a suggestion to the floor

DON ARGUS: No, Stephen, don't go down that path. Ask a question.

STEPHEN MAYNE: No, I am speaking to the resolution. I am commenting on the resolution. There are 337 million proxies lodged against this resolution, which is more than the 227 million against 15 and more than the 213 million against 16. In institutional Australia terms that is a very large protest vote. More than $3 billion worth of shares has been voted against this resolution by the institutions largely of Australia. They have obviously analysed it very closely. I know that some of the professional proxy advisory groups have recommended against this resolution.

I am simply recommending to the meeting strongly that we vote it down from the floor just to send a strong message to the board that we think the quantum of the shares available here is excessive, the performance hurdles seem to work reasonably well, but the quantum is excessive and particularly in light of the excessive total packages we have seen go to Mr Anderson in particular, that we really send a message to the board that there is a level of protest that they should take notice of when they are framing future resolutions.
Clearly the proxies have got it. The chairman has got 97 million in his back pocket plus the proxies in favour. The protest is not going to defeat the resolution, but it is going to send a very important symbolic message. So I recommend all shareholders send the board that message for future benefit.

DON ARGUS: Thank you, Stephen. Can I start again. Can I have a mover for the motion?

A seconder for the motion?

A show of hands for?

Against?

Again on a show of hands it would appear that the motion has been carried, but it is of course subject to a poll which we will now conduct. Please now mark your ballot papers for items 17 and 18. Can I also remind you to place your completed ballot papers in the boxes by the exit doors before you leave.

Ladies and gentlemen, that concludes the business. Our returning officer will oversee the count of the poll for each of the items of business and we will lodge the results with the Stock Exchange tomorrow morning. I thank you once again for your participation in tonight's meeting. The process was long because of the number of items of business that we had to consider, and I thank you for your patience. After you have deposited your ballot papers, please join me in the foyer for a well earned cup of tea. Thank you.


Go here for a full chronological list of edited AGM transcripts available from the past decade of shareholder activism.

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