Merger flop King pockets big bonus
City Editor THE defence boss who tried to push through a merger of BAE Systems with a Franco-German rival received a £1.2m bonus last year.
Chief executive Ian King saw his total pay package for the year hit £3.3m, despite engineering talks about a merger that would have put Britain’s defence capabilities in the hands of Paris and Berlin.
The proposed £31bn tie-up between BAE and European aerospace conglomerate EADS collapsed after talks broke down over the location of the company headquarters and jobs guarantees.
Both King and chairman Dick Olver backed the deal, which came under criticism from politicians and investors alike.
Senior investors called for a management clear-out following the talks, saying the leadership duo had ‘backed the wrong horse’. But BAE’s annual report, published yesterday, showed that King received basic pay of £963,000, up from £935,000 the year before, and benefits of £34,000.
He also was also given a bonus of £1.2m. One third of this will be put into shares and deferred.
The company said King and the firm hit targets to allow his bonus to be paid out.
But Deborah Hargreaves, from the High Pay Commission, said: ‘It’s been a difficult year for BAE by any measure. Most ordinary people would think that £963,000 is a pretty good salary and would struggle to understand why the bonus was also being paid out.’
She criticised Carl Symon, chairman of the firm’s remuneration committee and the former chairman of failed music retailer HMV, for agreeing to the payments.
King also became entitled to shares worth £1.1m during the year, which relate to previous years’ performance.
On top of this, the company paid £1.4m into his bulging pen- sion pot, which now has a transfer value of £13.1m – giving him an income of more than £700,000 a year for life once he retires.
He was also granted 1.8m shares which will pay out in future years if the group hits performance targets.
At yesterday’s closing price, 9.5p higher at 393.4p, they were worth £7.2m. Around half of t hose will be given freely, although King will have to pay £3.10 to unlock 959,000 of them, slimming the potential profit he could make from the shares.
Olver, who steps down this year from his post as chairman, saw his fees rise 7.7pc to £725,000 for the part-time role last year.
All executive pay has been frozen for the coming year – a move welcomed by Hargreaves.
She also said BAE should be ‘commended’ for raising staff salaries by 3pc at a time when many are facing no increase at all.