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The chief executive of BAE Systems is in line for a total pay package this year of up to £13.9mn under a new “golden handcuffs” deal, after the UK’s biggest defence contractor became the latest FTSE 100 company to push for higher rewards among its senior ranks.
The proposed package for Charles Woodburn includes a potential share award worth up to £9.5mn under a new long-term incentive scheme. The maximum payout would require a 50 per cent rise in the company’s share price, which is already up 40 per cent since the start of this year, and for him still to be in post in 2030.
BAE’s plan, outlined in the company’s annual report published on Monday, comes amid a push by some UK companies to offer higher rewards to their top executives after London Stock Exchange Group and Smith & Nephew last year secured shareholders’ agreement for multimillion-pound pay rises.
Drugmaker GSK revealed last week that it had proposed increasing chief Emma Walmsley’s pay to as much as £21.6mn a year.
Some corporate bosses have hit out at what they regard as investors’ overly restrictive approaches to boardroom pay, especially for companies that have a large international presence.
BAE Systems has been one of the best-performing stocks in the FTSE as investors pile into defence, betting that increased government spending will drive orders for years to come. The group, which builds everything from submarines to Eurofighter Typhoon jets, as well as missiles, last month reported a record order backlog of £78bn.
Shares in the company surged 14 per cent on Monday after European leaders met at the weekend to consider ways to bolster their military capabilities amid warnings from Donald Trump’s administration that the US will no longer pay for the region’s security.
Nicole Piasecki, chair of BAE’s remuneration committee, wrote in the annual report that while the current policy had only been approved by shareholders in 2023, further changes were warranted given the more uncertain geopolitical environment and the risk of losing key executives.
BAE, she said, had an “excellent leadership team” led by Woodburn, finance director Brad Greve and the president of its US business, Tom Arseneault, “and we are focused on keeping them”.
The company, she added, paid “local market rates in the locations in which we operate, but this can create pay compression challenges for globally mobile employees”.
While BAE was “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,” she added.
The current long-term incentive opportunities for BAE’s UK executive directors had “fallen below the UK market levels needed to compete for talent, including some specific UK competitors that actively seek our employees”.
Woodburn, who has led BAE since 2017, received £11.7mn in total remuneration last year, down from £13.45mn the previous year. His long-term incentive at present sits at 370 per cent of base salary.
In the first year of the new policy — assuming a 50 per cent appreciation in the share price and a maximum payout — Woodburn could receive just under £13.9mn in total. His minimum shareholding requirement would rise from 300 per cent of his base pay to 500 per cent, in line with the new bonus terms. The performance shares have a five-year vesting period.
The changes to the long-term incentive scheme are among several others being proposed, including removing the current restriction that “no role will have a salary greater than the chief executive”.
Cressida Hogg, BAE chair, said it was “important that our executive remuneration is comparable to UK-based multinational peers in order to compete for top talent in an international market restricted by our focus on engineering skills and nationality requirements”.
“The changes we are proposing seek to retain and reward our senior leaders over the longer term,” she added.
