BAE Systems (BA.L) has handed its chief executive a £2m ($2.77m) pay rise in order to prevent a rival company from poaching him, it has emerged.
The UK’s largest defence contractor said it has given Charles Woodburn, 50, a base salary increase of more than £100,000 and awarded him an additional share package worth £2m to ensure he stayed on at the firm.
City sources told Sky News on Friday that the board consulted with its top shareholders on the matter and received support for the move.
"Based on close examination of both the defence industry and FTSE-50 median reward levels, it had become increasingly clear that Woodburn's current remuneration no longer reflected his value to the company or standing in the market,” the company said in its annual report.
The pay increase, a 13% rise over two years, was described as a “one-off” offer, with Woodburn’s annual salary being increased to just over £1.1m.
Investors said that BAE's board, chaired by Sir Roger Carr, believed that the loss of Woodburn would risk destabilising the company as both its finance chief and the president of its US operations had both been recruited in the previous 12 months.
Woodburn has been at the helm of BAE since 2017, but he was approached by an unnamed major international UK-based public firm at the end of last year.
An early departure could also potentially damage complex international business and affect important government customer relationships, BAE warned.
As the company's work includes a number of sensitive government defence contracts, BAE's chief executive must hold the highest level of security clearance.
"Most importantly, the chief executive must have sufficient intellect and experience to occupy a position that is critical to our important role in the defence and security interests of the UK, US, Australia and the Kingdom of Saudi Arabia," BAE said.
"These challenges were weighed against the cost of measures that may be required to retain his services for an extended period."
It came as BAE announced that it has received a $21m (£15m) contract from the Ministry of Defence (MoD) to support the Common Missile Warning System (CMWS) over the next four and a half years.
“The UK Ministry of Defence has been a key partner on CMWS for decades,” said Christopher Austin, BAE Systems’ director of Threat Detection Solutions. “It is a privilege to continue to help ensure the safety of our ally’s aircraft and personnel with the protection of CMWS.”
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