As BAE boss prepares to bow out, he issues stark plea

Sir Roger Carr is a FTSE 100 chairman straight from the central casting, the epitome of a senior industrialist. He has served on a range of boards including Centrica, the owner of British Gas, pub group Mitchells & Butlers, Chubb and Thames Water, as well as being Chairman of the employers’ association CBI, Deputy Chairman of the Court of the Bank of England and Chairman of the BBC Trust.

But he first came into the wider public consciousness just over a decade ago when, as Cadbury’s chairman, he was on the receiving end of a takeover bid from US food giant Kraft.

The £11.8bn deal hit a national nerve and led to reforms in takeover rules.

Millions who would normally have no interest in the City were outraged by the idea that the Creme Eggs and Wispa bars – which, like Proustian madeleines, are the essence of nostalgia for a British childhood – were being sold to the Americans.

Carr went on to become chairman of the flagship defense firm BAE Systems, one of Britain’s top board seats. He has held the position since 2014 and will leave later this year.

He took over at a traumatic moment for BAE in the wake of a failed £28bn merger with European aviation giant Airbus.

The proposed deal, which would have involved putting the British company into a Franco-German behemoth, was highly controversial at the time.

Now it’s unthinkable. In a post-Brexit, post-Ukrainian geopolitical landscape, it seems bizarre that the sale of a company so important to our national security and defense was ever considered. Carr believes that with the war raging in Europe, BAE has never been more relevant to Britain.

“We have the most dangerous world we’ve lived in for most of our lives. Complacency is dangerous. You can’t wish for peace, you have to protect yourself,” says Carr. “BAE is so important for that, as is the prosperity and economic security of this country.”

Shares have nearly doubled since he took over, suggesting that the arguments made at the time of the failed merger that the company lacked an independent future have failed.

Just as there has been a rethink of takeover rules, Carr would like to see a new approach to ESG investor attitudes – environmental, social and governance – towards BAE and other defense companies.

BAE is currently blacklisted by some “ethical” investors, but he says Ukraine is emphasizing their positive role in protecting democracies and standing up to tyrants. “It’s essential to make sure we differentiate between highly regulated, ethically-led and government-backed defense contractors and the very free-spirited arms dealers,” he says.

“These are two very different things. If you mix them up, and thereby damage the perception of the defense contractor, you undermine the country.’

Now 76, Carr started out in the 1980s as one of a trio of young corporate raiders at Williams Holdings, along with Brian McGowan and Sir Nigel Rudd. But it was his role at Cadbury, where he was a key player in one of the hardest-fought bids City have ever seen, that propelled him to the forefront.

Despite the resistance, the deal went ahead. Kraft duly cut hundreds of jobs it had promised to keep and moved its corporate tax seat to Switzerland.

Looking back on it now, Carr says it was “a lot of head versus heart” for him, adding that shareholders “made a very material gain.” He then campaigned to push back takeover bids for hedge funds, which had built up a nearly 30 percent stake in Cadbury.

He supports the new National Security and Investment Act, introduced last year to protect strategically important companies from unwanted bids.

But he is not only chairman of BAE, but also senior advisor to US private equity firm KKR. That could be contradictory to some observers as there has been a series of US private equity takeovers of UK defense companies recently.

Does he think those deals have been detrimental to the national interest? “You can’t paint all the pictures with one brush,” he says, referring to the example of KKR taking a large stake in German defense supplier Hensoldt, which it sold earlier this year. “KKR has run it impeccably with the full support of the German government,” he says.

‘I’m sure there are examples that have done less well and will have less happy endings.

‘You have to think. In today’s world, you need to put a very strong ring around defense knowledge to keep it from leaking into the wrong hands. That is why BAE still has a golden share [enabling the Government to block an undesirable takeover].’

He plans to continue his role with KKR after he retires from BAE, and will continue as Chairman of the Trustees of English National Ballet, a position he has held since 2018.

“The whole concept of battleships and ballet shoes seems like a strange mix, but for me it was very enjoyable,” he says, adding that he enjoyed working with ENB’s former artistic director and famed ballerina Tamara Rojo.

One of his goals, he says, is to dispel ballet’s highbrow vibe and bring it to new audiences. “Our ticket prices are very affordable compared to football. It’s ballet for everyone, we want to reach parts of the community that we traditionally wouldn’t have done.’ In that spirit, he argues that BAE is not only important for defense, but also for improving the level.

The company employs approximately 37,000 people in the North West of England. It is a major provider of apprenticeships and last year recruited a quarter from ‘the most disadvantaged parts of the communities in which we operate’.

He wants the major political parties to agree on a long-term industrial strategy, which is probably a lost hope.

“At BAE, we plan for decades and we leave a legacy for those who follow us.

“That has to happen in a political-industrial linkage, so we don’t live in a fantasy world, but there is a fundamental belief in the principles on which economic prosperity is built,” he says.

The latest reported figures show that the order book at BAE, including for submarines, frigates and aircraft, is around £53bn and growing. The company is the key industrial partner in a recently announced alliance between the UK, Italy and Japan for a new fighter jet.

In the new Global Combat Air program, the Tempest project will merge with Japan’s FX to develop a new combat aircraft by 2035. It will not only be important for the defense of the empire, but also have a great economic impact. Analysis by accounting firm PwC found it would support 21,000 new jobs by 2050 and add £26bn to the economy.

“The storm is huge. It will create the highest quality jobs and skills the world will envy in the North West of England for decades to come.”

Carr makes no secret of the fact that he would stay longer with BAE were it not for chairmen who would have to step down against the board in the boardroom after nine years.

But, he says, he’s handing it over to a “very, very capable successor.”

In a revolutionary move for a once ruthless macho company, that will be Cressida Hogg, the first woman ever to chair the aerospace giant.

Unusually for a man of his generation, Carr has long been an advocate for women in business.

Watching the career of his daughter Caroline, who is a partner at private equity firm Permira, has made him aware of the potential barriers women face. “When you have a daughter who is very skilled and motivated, you realize very well that not all women get the opportunity,” he says.

Several academic studies have shown that male bosses with daughters are more understanding of women in the workplace, a finding that has infuriated some observers who say they should all embrace equality regardless of paternal status.

Carr says appointing a female chair shouldn’t be “conspicuous” or unusual. “It’s just part of the normal course of business.

“The company is so much more diverse these days, not just at board level, but throughout the organization. There is an urge for more and more young women to take up positions of responsibility.

“If I hand it over to a woman, that mission will continue.”