BAE Systems Chief Executive Mike Turner will step down as CEO and leave the board in August 2008, Europe's largest defense company said on Tuesday.
The company did not name a replacement for Turner, who is retiring.
"I have decided to retire from the company next year when I reach 60 after 42 years with the company, the last five and a half years as CEO," Turner said in a news release.
Asked in August about his future at the company, Turner told Reuters: "I don't plan to go anywhere."
The company said Turner would receive an award of 231,618 ordinary shares as well as about 1.181 million pounds ($2.41 million), subject to meeting performance targets.
Chairman Dick Olver thanked Turner for his service to the firm, "particularly over recent years for his part in the company's strong financial performance and strategic execution."
Under Turner's leadership, BAE sold out of airliner maker Airbus and has made lucrative inroads into armored vehicles, particularly in the United States, where BAE now dwarfs other European defense firms.
Operating profits last year were two-and-a-half times those in 2002, the year he took over, but Turner has weathered controversy as well.
BAE's role as prime contractor on the controversial arms-for-oil Al Yamamah deal between Britain and Saudi Arabia made the company the subject of regulatory probes in the UK and United States.
Britain's Serious Fraud Office called off its probe into the matter, but has continued examining other BAE deals in Romania, Tanzania, the Czech Republic and South Africa.
BAE's sometimes fractious relations with the Ministry of Defense have also put Turner's own straight-speaking style under the microscope.
However, his supporters say his style has helped BAE forge a more sound relationship with the ministry, including a move away from risky, fixed-price contracts.
Regarding a successor to Turner, a BAE spokesman said: "We have a clear succession plan and as part of that, we will benchmark potential internal successors against potential candidates from outside the company."
When longtime chairman Dick Evans stepped down in 2004, BAE looked beyond the company and outside the defense industry, tapping BP veteran Olver as successor.
Internally, analysts said Ian King, currently chief operating officer for BAE's UK and other non-US businesses, is one contender for new CEO.
"I think it's inconceivable that anybody else will get it," said one London-based brokerage analyst.
A second analyst said among possible internal candidates, King looked like a "heavyweight."
King came to BAE in 1999 via BAE's takeover of Marconi. As group managing director of BAE's Customer Solutions & Support division from 2001 until January of this year he played a leading role in BAE's profitable expansion in aftermarket support services.
BAE shares were down 1.67 percent at 501 pence versus London's FTSE 100 index which was off 0.36 percent.