Mike Turner, I might point out, was at that time on a salary of £945,000, heading for a £1.4m bonus, a termination payment of £236,000 and would earn various pension enhancements worth £400,000. So those appropriate incentive shares, worth about £1m, came on top of that lot. We will come to the various ordinary share payments later.
I could have quoted you any number of similar dubiously justificatory passages from BAE's Remuneration Committee reports - for instance the carefully measured one this year which begins "2011 was particularly challenging" and ends "accordingly the Committee determined a 137.2 per cent payout for the Chief Executive".
As defence contractor BAE Systems bids to shuffle off its public company coils by throwing in its lot with EADS - a process sure to involve many recoils - I have been struck by the negative coverage of how BAE got to this juncture. For one reason or another I have not paid a lot of attention to BAE for a long time. But good heavens the knives are out now and you cannot miss them. The last time I heard BAE written off in these terms was when Lord Weinstock imperiously dismissed the (then very different) company as a league of chancers with a joke for a balance sheet. (And yes that certainly dates me.) The story of how BAE turned the tables on Weinstock's successors, ultimately snaffling what had been his prime defence assets, would make a great film. I wonder what Lord Woolf, one of BAE's more recent tormentors, would have made of Lord Weinstock's business, the once lamented now forgotten GEC.
I surveyed BAE's recent history for myself. It's one of those hang-on-in-there stories typical of the veteran blue-chip business establishment. The wheels keep turning. The operational basics are delivered. But there is no traction for investors. Modern BAE came into existence in 1999 when it acquired GEC's electronic systems business. The share price then was about 450p and the share price now is 320p. Thank heavens I have not paid it a lot of attention. BAE spent a lot of that time trying to improve its market position in the US. You can see why: over the same period, the shares of Lockheed Martin rose by 240 per cent, General Dynamics by 560 per cent and Northrop Grumman by 200 per cent.
A kind commentator might note that this performance disparity did not go altogether unnoticed in the pay packets of BAE's top executives. Its various LTIPs and PSPs, its ExSOPs and SMPs, its RSPs and its PSAs - the whole ludicrous, demeaning collection of conduits to channel shareholders' money into management's pockets - did not pay out tens of millions of pounds, although the payouts they did make were not to be sniffed at - for instance, in the same year that Mike Turner got 231,618 shares for doing his bounden duty of not frustrating the installation of his successor, he cleared £3m on various PSP (Predictable Share Payment, if I am not mistaken) awards made during what turned out to be a fortuitous dip in BAE's share price in 2003-04 and a further £1m or so from the RSP (Reliable Share Payment, I believe) and the SMP (Supplementary Me Payment, I am sure). Did I mention the £800,000 on his ExSOP (Exemplary Share Out Payment, but I confess I'm guessing now).
But while these big wealth machines failed to do the business and BAE's long-term shareholders despaired, the grubby matter of ensuring BAE's executives stayed in the pay race was fulfilled by an ever-generous annual bonus scheme. At the beginning of 2002, BAE's share price was 340p and recall it is 320p now. Over that period, BAE's chief executives - Mike Turner and his successor Ian King - earned £7m in basic salary and £10m in annual bonuses. The bonus was never less than 98 per cent of base salary and averaged 148 per cent.
Hardly egregious by modern standards. But nevertheless, a nonsense.
