Shareholders demand BAE execs resign after EADS fiasco

Posted on 23 Oct 2012

Shareholders are calling for a number of board members at defence firm BAE Systems to resign due to the damage caused by the collapse of the proposed mega-merger between BAE Systems and European aerospace group EADS.

Three investors, including BAE Systems’ largest shareholder Invesco Perpetual, which owns 13%, have written to the board demanding that chairman Dick Olver and senior independent director Sir Peter Mason resign.

The shareholders believe that BAE Systems lacks direction and that this can only come with change at the top.

The investment firms have been joined by individual investors society ShareSoc, which added its voice to calls for Mr Olver to resign, while adding that chief executive Ian King – BAE Systems’ face of the takeover – should step down.

The proposed merger lacked support from its major shareholders, which has damaged its reputation in the US defence market as the company looked to Europe rather than the country it has spent a decade building what Invesco Perpetual call a “unique and privileged” position in the market by setting up its US subsidiary BAE Systems Inc.

Invesco Perpetual went down an unconventional route by releasing a statement saying it “does not understand the logic for the proposed combined company” while negotiations were ongoing.

There is now a large divide between the board and the shareholders with Invesco Perpetual leading the way – ShareSoc throwing its weight behind the arguments made in the statement by saying “we can do no better than quote some of the statements made by Invesco Perpetual.”

ShareSoc chairman Roger Lawson said that the merger was “a classic case of empire building by corporate management and there may have been financial incentives for the management to pursue this proposal.”

It was reported that shares owned by CEO Ian King would crystalise if the merger took place, and result in him instantly acquiring shares to the value of £18m.

Following the collapse of the proposed merger, BAE Systems stated that it was never able to reveal the full benefits of the deal to shareholders but was never very clear what benefit was and ShareSoc believe that “a merger with a US defence company might make a lot more sense.”

“ShareSoc therefore invites chairman Dick Olver and chief executive Ian King to step down as soon as possible,” read the statement. “If they do not do so we will oppose their re-election at the next Annual General Meeting.”

The executives require a majority vote for reappointment.

It continued: “This merger was misconceived, mishandled and simply a mistake. The directors of BAE who promoted it should accept responsibility and resign. BAE clearly needs a new leadership team that can develop an alternative solution to the strategic challenges the company faces.”

BAE Systems has responded to the calls from shareholders with a statement of support for its directors.

“The company is aware that a minority of its institutional investors have recently made public their own views on board succession planning, which differ widely from those of the board and the majority of the company’s principal shareholders,” it says.

“The company intends to continue with its established succession plans described in its last Annual Report, including the appointment of a successor to Dick Olver as Chairman following an appropriate process to identify the best candidates.”

For a full interview with Roger Lawson click here.