© Reuters. FILE PHOTO: A sign adorns a hangar at the BAE Systems facility at Salmesbury
LONDON (Reuters) – Britain’s biggest defence contractor BAE Systems (LON:) is facing mounting criticism for handing its chief executive an extra 2 million pounds ($2.8 million) to convince him to stay after another bluechip company tried to poach him.
Institutional Shareholder Services (ISS) recommended that investors vote against BAE’s remuneration report, joining another shareholder adviser group, Glass Lewis, which earlier in April also recommended opposing it.
ISS said in its note that the extra pay awards given to BAE Chief Executive Charles Woodburn were “well outside market norms”.
“Moreover, one-off pay awards to address retention concerns have frequently been shown to be ineffective, and are therefore not typically supported,” ISS said.
Woodburn received a salary rise of 13% at the start of 2021 to bring his annual pay to 1.1 million pounds. He is also in line for an extra 2 million pound long-term share award payable if he stays at BAE until the end of 2023.
Shareholders will vote on the remuneration report at BAE’s annual meeting on May 6.
BAE announced the pay increase in its annual report, explaining that Woodburn had been offered the top job at a major international public company based in the UK, named by Sky News as mining giant Rio Tinto (LON:).
Woodburn worked in the oil and gas industry before joining BAE as chief operating officer in 2016 and taking on the chief executive role in 2017.
Given the sensitive nature of BAE’s defence work for Britain, BAE’s chief executive must be a British citizen. That recruitment challenge plus the complexity of BAE’s business and Woodburn’s track record to date made the company keen to retain him.
Top shareholders support the company’s decision, BAE said.
“We’ve proactively engaged with our top shareholders on the matter, who are overwhelming supportive of the board’s actions,” a spokeswoman for BAE said via email.
($1 = 0.7219 pounds)
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