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
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Sport
sportSo, how closely were you paying attention during 2014?
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect