BAE Systems boss in line for huge pay day at FTSE 100 giant
The chief executive of FTSE 100 defence giant BAE Systems is in line for a huge pay day if shareholders approve proposed changes to the group’s remuneration policy.
Charles Woodburn could be handed a bonus worth 500 per cent of his base salary, which currently sits at £1.27m, if he is still in post in 2030.
Woodburn’s long-term incentive currently sits at 370 per cent of his annual salary. His minimum shareholding requirements (MSR) would also rise from 300 per cent to 500 per cent.
The proposed bonus forms part of sweeping changes BAE System’s remuneration committee is putting to shareholders over fears it risks losing top talent to its rivals.
For 2024, Woodburn’s total pay packet reduced from £13.4m to £11.6m because of a fall in the performance shares element of his remuneration.
BAE Systems’ remuneration committee is proposing to:
- Increase the long-term incentive (LTI) opportunity for UK executive directors and other key senior executives “to a more competitive level”.
- Up the minimum shareholding requirements (MSR) for UK executive directors “to a level corresponding to their proposed new maximum grant of performance shares”.
- Remove the current facility that enables executives to sell up to 75 per cent of their shares before achieving their MSR.
- Remove the restriction that “no role will have a salary greater than the chief executive”. BAE Systems said the policy current could prevent is from “hiring niche skills in the future, or from acquiring a new international business where base pay levels are already higher than our own”.
- Remove the current salary increase limit of 10 per cent in any single year for executive directors and instead adopt a more practical limit that “ordinarily any increases will not exceed the average percentage increase for the wider workforce in the same locality”.
- Change the bonus level for executive director at threshold performance from 20 per cent to 25 per cent.
- Replace the safety and diversity underpin for annual bonus that currently applies only to the outturn of non-financial objectives with a ‘bonus moderator’ that can reduce the whole of the calculated bonus if there are any factors that warrant a reduction.
The proposed changes are subject to approval at BAE Systems’ annual general meeting.
‘We need to change unsustainable attraction and retention strategy’
Writing in the annual report, chair Nicole Piasecki said: “The current remuneration policy was approved by shareholders in 2023.
“Since then the geopolitical and economic environment has become more uncertain, and the committee believes that the risks of losing key executives and the urgent opportunities to recruit new types of talent company-wide warrant addressing some changes to the remuneration policy now, rather than waiting another year.
“We have an excellent leadership team led by Charles Woodburn, Brad Greve and Tom Arseneault, and we are focused on keeping them.”
She added: “We pay local market rates in the locations in which we operate, but this can create pay compression challenges for globally mobile employees.
“For example, target remuneration for some of our US employees is close to or greater than for our UK-based executive directors.
“We risk losing critical employees to organisations able to offer higher pay opportunities globally, and even within the same country.
“Our current remuneration policy means that we have difficulty matching and recruiting from those same competitors, and we are increasingly forced to pay our joiners more than our stayers, and that is an unsustainable attraction and retention strategy.
“While we are not proposing a global move to US (or other country) pay levels, we will continue our approach of paying appropriately for the local competitive market in which an employee is based.
“LTI opportunity for our UK executive directors and some key senior executives has fallen below the UK market levels needed to compete for talent, including some specific UK competitors that actively seek our employees.
“The proposed increases to LTI opportunity are designed to mitigate those risks, without overpaying in the market.”
BAE Systems leads FTSE 100 to new heights
The publication of BAE System’s annual report comes after the FTSE 100 index rallied to an all-time high on Monday morning, bolstered by surging defence stocks as European countries signalled their willingness to up defence spending over the weekend.
BAE Systems led the market higher as the firm’s stock jumped 17 per cent.
Rolls-Royce also helped send the FTSE 100 to new heights, with the Derby-headquartered giant up nearly six per cent on Monday.
Last month, BAE Systems forecast more than £30bn in sales in 2025 as governments across the globe face pressure to hike military spending.
The London-listed defence giant said it expects sales to increase by seven to nine per cent on an annual total of £28.3bn in 2024.
Underlying pre-tax earnings are also expected to rise eight to ten per cent from just over £3bn.