A daunting task for Olver

SHOULD we stifle a yawn at the choice of Dick Olver, deputy chief executive of BP, as the part-time chairman of BAE Systems? He is a dark horse but, after a long search conducted by Sir Peter Mason of Amec, he may prove the best that BAE could hope for.

If ever there was a company in Britain that cried out for brilliant strategic leadership and an understanding of the closed world of defence contracts and aerospace, it is BAE.

Olver has been a key member of Lord (John) Browne's team at BP and is a talented manager with people skills and project experience. You have to be to survive at the most senior level in BP.

But he is still a stranger to major investors and will need to go on a charm offensive in the City - and Whitehall - if he is to make an impact when he succeeds aerospace veteran Sir Richard Evans in July.

He will need to contend with three big American value fund shareholders - Brandes, Franklin Resources and the Capital Group - which between them control 23% of BAE's equity and are not renowned for lying down and playing possum when life is not going well.

One early job he faces is reshaping BAE's board. Lord Hesketh, Michael Portillo and former NatWest director Professor Sue Birley are seen as short of the muscle needed in an industrial giant.

BAE is a different kettle of fish to BP. It is a world-class defence contractor with great avionics technology and a list of problems as long as your arm. The common factors for BAE and BP are that they are international, have experience of Russia and America and they manage big projects.

The ability of BAE to control costs has been in contention for as long as I can remember. Its biggest and most successful contract, the Al Yamamah deal with Saudi Arabia, is shrouded in secrecy.

At regular intervals in the company's recent history, questions have been raised about alleged illegal behaviour in the entertainment of customers. At one point a dossier went off to the Serious Fraud Office, which took no action.

Most recently there has been concern as to whether BAE is capable, along with French group Thales, of being the prime contractor on the building of two aircraft carriers for the Ministry of Defence.

These are intractable issues that would test a full-time chairman working with a big executive team, let alone a two-day-a-week person from a different industry.

There seems to be a belief at the moment that anyone who has worked at BP must be top drawer. The John Browne halo effect has created an extensive BP diaspora that carried Bryan Sanderson to Standard Chartered, Chris Gibson-Smith to the London Stock Exchange and National Air Traffic and John Buchanan to Boots.

What BAE really needed was someone with first-hand experience of the defence industry like Richard Lapthorne of Cable & Wireless, Sir David Lees of GKN or Sir Peter Gershon, the former GEC/Marconi executive currently reshaping the civil service.

Clearly the guys with defence and aerospace experience were not available. Olver has drawn the short straw. But he will need to roll up his sleeves and put in some long hours if BAE is to be rescued from its long nosedive.

Royal rewards

AFTER the super profits produced by the Royal Bank of Scotland in 2003 one might have expected bumper payouts for the company's directors.

But the end of a special bonus scheme related to the NatWest takeover in 2000 means that overall the pay of executive directors and their bonuses will be down 40% when the annual report is released today.

RBS shareholders and customers should not shed a tear just yet for the hard-working bank chieftains. Fred Goodwin, the much-feared chief executive, takes a cut in basic pay and bonus this year to £1.9m from £2.6m.

But this only tells part of the story. A new medium-term incentive plan is now on stream and it will dish out £1m for 'Fred the Shred' this year, bringing him up to a shade under £3m.

Of equal interest, RBS is starting to respond - at its own pace mind you - to complaints about the non-executives on its board.

Two long-standing independents, the joint vice chairmen Scottish panjandrum Sir Angus Grossart and Sir Iain Vallance are to stand down at the 2005 agm to make way for fresh blood. A search is expected to start soon.

Beyond that, one supposes that Sir George Mathewson, 64, the veteran chairman, may have to begin thinking about a retirement date.

But we should not hold our breath.