SIR JOHN CHISHOLM, the executive who controversially made more than £20m from the privatisation of the government defence agency Qinetiq, is to step down.

Headhunters have been appointed by the group to find a successor, who is expected to come from outside the company. Chisholm, 61, who is understood to be retiring, will not leave until next year, with a chairman-designate joining the board later this year.

His departure will end an association that dates back nearly two decades. In 1991 he was the first chief executive of the Defence Evaluation and Research Agency, an organisation created from a disparate group of Ministry of Defence (MoD) laboratories and research establishments. He steered the renamed Qinetiq through a controversial privatisation in 2003 and float in 2006.

The deals made him and other senior Qinetiq managers wealthy. Their multi-million-pound paper fortunes – Chisholm paid £129,000 for a stake in the company worth £26m when the group floated, attracted widespread criticism.

The National Audit Office report into the privatisation found that “returns in this case exceeded what was necessary to incentivise management”.

Last year Edward Leigh, chairman of the House of Commons public accounts committee, went further, accusing Chisholm and his colleagues of “profiteering at the expense of the taxpayer”, and saying the MoD had been “an innocent at a table of cardsharps”.

Chisholm hit back, saying the criticisms were “grossly unfair”, and that the reshaping of Qinetiq had been the greatest achievement of my working life”. At Friday’s closing price of 165p, his stake was worth just over £21m.

Chisholm stepped up from chief executive to become executive and then non-executive chairman in defiance of corporate-governance rules, which frown on former chief executives taking on such roles at the same firm. The company said his experience was invaluable.

Since privatisation Qinetiq has made a string of US acquisitions. Its share price has languished, however, only briefly going above the 200p float price. The MoD, which retained a large stake at the time of the sell-off, sold its remaining shares last year for £257m. It retains “golden-share”-style rights that give it powers of veto over aspects of the group’s ownership.

Qinetiq yesterday refused to comment on Chisholm’s future, and it is not certain whether the group will announce his departure with its interim management statement on Tuesday.

The company may, however, say it has secured a new partner for its troubled Metrix military-training consortium. It is in talks with catering group Sodexo after its original partner, Land Securities, withdrew.

As well as his £220,000-a-year role at Qinetiq, Chisholm is chairman of the Medical Research Council.

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