Interactive Investor

Your vote counts: former BAE Systems man’s tasty pay rise

25th February 2022 08:28

Graeme Evans from interactive investor

A strong performance in 2021 meant the boss of this FTSE 250 firm bagged £3.5 million for the financial year. Now he’s getting another big pay rise. Is he worth it?

A planned 15% pay rise that will hand the boss of defence products firm Chemring Group (LSE:CHG) an extra £67,000 a year by 2023, will be put before shareholders in the coming days.

Chemring said the increase for Michael Ord, who has been at the helm since 2018, is justified by the company's strong financial performance and the creation of £400 million of shareholder value as part of its rise to the FTSE 250 index.

His £555,000 annual salary is being phased in over two years and comes on top of an earlier 9.6% increase in Ord's pay to £483,000 at the start of 2021. The company's 116th AGM takes place in London on Thursday.

Chemring

When: 11am, Thursday, 3 March.

Where: Investec Bank, 30 Gresham Street, London, EC2V 7QP.

How to participate: Proxy voting forms must be returned by no later than 11am, Tuesday 1 March. More details on the AGM can be found here.

Who's in the chair? Carl-Peter Forster, who has been on the board for six years and previously held senior roles at automotive giants including BMW, General Motors and Tata Motors.

How did the company do in the year to 31 October? The FTSE 250-listed sensors and defence countermeasures firm reported a 2% fall in revenues to £393.3 million, but earnings per share (EPS) rose 12% to 16.9p. It faced a number of challenges in the year including FX headwinds, delays in US procurement, labour shortages and various supply chain and inflation pressures. A final dividend of 3.2p will be paid on 31 March and represents an increase of 23% as part of a new policy to target medium-term cover of about 2.5 times underlying EPS.

How did shares perform? Up 16.5% to 292.5p (265p on Thursday 24 February).

How much is the boss paid? Michael Ord, who has been in charge since June 2018, got £3.5 million for the financial year after the company's strong performance meant he picked up an annual bonus of £592,000 and £2.4 million from the vesting of long-term share incentives. His basic salary for the period was £476,000, having received a 9.6% pay increase in January 2021. Chemring's annual report revealed plans to increase his salary to £555,000 by 2023.

Why is Ord getting another big pay rise? Ord joined Chemring from BAE Systems (LSE:BA.), where he was managing director of its naval ships and F-35 Joint Strike Fighter businesses. With Chemring being his first plc chief executive role, he was appointed on a below-market base salary. Having taken into account pay rates at similar businesses and Ord's “exceptional performance”, the remuneration committee believes an appropriate salary should be £555,000. This is being introduced in two stages, with the first rise made last month to £520,000.

What's the view of voting agencies? Glass Lewis welcomes the staggered approach to Ord's pay rise and further assurances that any subsequent pay rises will be in line with the wider workforce. As it believes the salary is reasonable compared to FTSE 250 peers, the voting agency recommends that shareholders support the company's annual remuneration report as well as the binding vote on the triennial remuneration policy.

How did last year's AGM go? Shareholders supported the annual remuneration report with 99.8% of votes in favour.

How is the company doing on diversity? The company meets the Hampton-Alexander review target for women to fill at least 33% of board roles. It has pledged to do the same for senior management positions by 2027 and will seek to meet the guidelines of the Parker review on ethnic diversity as it refreshes board composition.

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