The prospect of an investor revolt against BAE Systems, Britain’s biggest defence contractor, has risen after another influential adviser urged shareholders to oppose a £2m ‘golden handcuffs’ deal for its boss.

Sky News has learnt that ISS, which provides closely watched voting recommendations ahead of companies’ annual meetings, has argued that the pay rise for BAE chief executive Charles Woodburn was “well outside market norms”.

It added that such retention awards had “frequently been shown to be ineffective”.

ISS’s recommendation to investors comes days after Glass Lewis said BAE investors should oppose its remuneration report at next month’s AGM.

The arms manufacturer gave Dr Woodburn a 13% salary hike and a £2m long-term share award following an attempt by the miner Rio Tinto to poach him.

The share award is only payable if he stays at BAE for three years.

A number of top investors say they have been reassured by chairman Sir Roger Carr’s explanation of the decision, and that they expected to support the company’s pay report.

A BAE spokeswoman said: “We’ve proactively engaged with our top shareholders on the matter, who are overwhelmingly supportive of the board’s actions.”

Owing to the sensitivity of BAE’s work on numerous government defence contracts, it must have a British chief executive who can hold the highest level of security clearance.

That requirement is a complicating factor in succession planning, heightening the importance of retaining him, the company told shareholders.

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