BAE's top trio to miss their bonus targets

Managers lose out on millions as defence giant's profit falls amid military spending freeze

The top three bosses at FTSE 100 defence titan BAE Systems are set to miss out on multi-million pound bonuses after failing to meet their earnings targets for 2012.

Last year, chief executive Ian King, finance director Peter Lynas and US head Linda Hudson, below, were criticised for raking in bonuses despite overseeing job losses and a profit decline.

The only reason the trio were awarded such lucrative packages was because BAE received a one-off tax rebate of almost £200m, which boosted the earnings per share (EPS) financial measure by enough to trigger bonuses.

Without that rebate, which some analysts thought should not have been included, EPS would have been under 40p a share but ended up at 45.4p. This meant that, including base salaries, Mr King's remuneration was £2.4m, Mr Lynas received £809,000 and Ms Hudson was awarded more than £1.6m.

Analysts at Investec have estimated that EPS will slump to 39.4p in 2012, while UBS has forecast just 37.5p. The amount could still be boosted by 3p a share if BAE finally agrees with Saudi Arabia the price of a 2007 Typhoon contract ahead of Thursday's results, though this seems unlikely.

Under the company's share-matching and performance share plans BAE's top brass get bonuses and long-term stock awards if EPS grows between 5 and 11 per cent annually over a three-year cycle.

BAE's financial performance has been sluggish recently due to global defence spending cuts. This was one of the key reasons why Mr King was keen to merge with Airbus-maker EADS last year, better balancing the business with a huge civil aviation manufacturing arm.

However, German Chancellor Angela Merkel vetoed that politically sensitive move, leaving BAE executives to ponder how they will grow the business while government defence budgets continue to be squeezed.

At last year's annual general meeting in Westminster, angry BAE employees protested over plans for nearly 900 job cuts at a site in Brough, East Yorkshire. However, many of these have since been saved through winning contracts, most notably a £2.5bn order from Oman for Typhoon and Hawk military aircraft in December.

However, fears remain that BAE will soon have to shut one of its dockyards due to a lack of shipbuilding work, once two supercarriers, worth a combined £5bn, are largely completed over the next few years. As first revealed in The Independent on Sunday, consultant LEK was brought in to review the future of sites in Portsmouth and Scotland, with the south-coast operations most under threat.

BAE is not expected to confirm any closure in this week's results. However, the Government is prepared for the political fall-out of any such announcement, as a recent Ministry of Defence report concluded Portsmouth dockyard does not have much of a future in its current form.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee