Royal Mail faces shareholder showdown over Zurich-based boss’s pay
Rico Back is receiving a £640,000 annual salary.
Royal Mail bosses are preparing for a showdown with investors over pay after giving a salary rise to its new Zurich-based boss, who has opted for a regular commute to London over a UK move.
Investor advisory firms ISS and Glass Lewis have both suggested shareholders vote against the remuneration reports at Thursday’s annual general meeting, in part because newly-appointed chief executive Rico Back is set to receive a higher salary than outgoing boss Moya Greene.
Mr Back is being paid a £640,000 annual salary, which is £100,000 more than his predecessor.
He has also decided to stay in Zurich, Switzerland, with plans to commute regularly to work at Royal Mail’s London headquarters.
Royal Mail stressed that he had been living in Zurich with his family for more than 10 years and will pay full UK tax on all of his earnings including bonus payments.
“Rico will use appropriate scheduled commercial flights when travelling directly between Zurich and London,” Royal Mail said in a statement.
“He will personally bear the costs for these flights and his accommodation in London,” they added.
“Given that his main place of work is here, he clearly doesn’t commute back and forth every day.
“Like any other major business our senior executives are highly committed and very mobile, irrespective of where they live.”
Royal Mail defended Mr Back’s salary level, saying it makes up for a lower cash pension allowance, and that his total fixed pay and benefits will be in line with Ms Greene’s.
But ISS highlighted part of Royal Mail’s payment policy in 2016, which said its remuneration committee “recognises that the pension provision is high” and that it would “adopt a lower percentage for newly appointed executive directors”.
“The level of the former CEO’s pension is not considered a compelling reason for a significantly higher base salary for a new executive director,” ISS said.
Glass Lewis also said it had “severe reservations about supporting the remuneration report”.
“Where an increase in base salary is warranted to facilitate recruitment, we would expect this to take the form of phased increases across the lifespan of Mr Back’s term, reflecting concomitant increases in experience and knowledge.”
Royal Mail recently made headlines for paying a near-£6 million “golden hello” to Mr Back, who took over from Ms Greene last month.
The company said it awarded the hefty sum to buy out his contract at GLS – Royal Mail’s European parcels business, where he previously served as chief executive.
ISS has raised a red flag over Ms Green’s payouts, which include a full-year cash bonus of £774,000 as she heads out of the door.
“It is not market practice for a departing director to receive a guaranteed bonus payment upon termination,” ISS said.
“However, more concerning is that she gave her notice in April 2018 to step down in September 2018, and yet she will be receiving 12 months’ salary and bonus from September 2018, instead of from April 2018,” ISS added.
Royal Mail said: “Moya Greene is an exceptional executive and we have made the right remuneration arrangements to reward the generation of shareholder value in the longer term and to honour our contractual obligations.”
Royal Mail will hold its AGM in Sheffield from 11am.
Earlier this week, Royal Mail reported a 7% fall in letter revenues in the three months to June 24, while UK parcel revenues rose 6%.
This left revenues in the UK division down 1%, while overall group underlying revenues lifted 2% thanks to an 11% surge in turnover at its European parcels business, General Logistics Systems (GLS).
Royal Mail reiterated its warning that it could see a steeper-than-expected drop in letter mailings due to the new General Data Protection Regulation (GDPR) changes and added that it is “monitoring any potential impact closely”.