Fury at £6m deal for Royal Mail chief who’ll keep living in Switzerland
‘Looks like a self enrichment scheme’
ROYAL Mail is facing mounting anger over its decision to hand its new chief executive nearly £6million and allow him to run the business while living in Switzerland.
German executive Rico Back, 64, took over in June after previous boss Dame Moya Greene stepped aside.
But critics have questioned why he received the staggering sum to buy him out of an old contract relating to his previous role running Royal Mail’s European parcel business GLS.
On top of this, he could get £2.7million a year in his new role, combining salary and benefits. The father of four plans to remain living in Zurich, Switzerland.
The huge payouts for the new boss come despite the average worker at Royal Mail, which was privatised in 2015, earning only £28,274. The company employs around 141,000 people in the UK.
Meanwhile, the price of a first-class stamp has leapt from 41p in 2010 to 67p today.
Shareholders are expected to revolt against Mr Back’s pay at Royal Mail’s annual general meeting in London today. Mr Back’s pay and bonus were revealed when he was appointed Royal Mail chief executive in April. However, details of his extra £5.8million payment were only declared when the firm published its annual report in May – and even then they were buried on page 144.
Labour MP Peter Kyle, a member of the Commons Business and Industrial Strategy Committee, said: ‘It’s a slap in the face to postal workers to hear that their new boss seems to have been given everything he could have dreamed of. We are currently doing an inquiry into executive pay and I have heard stories and seen practices that would make anyone’s toes curl – I hope this is not one of them.
‘Royal Mail needs a full-time chief executive and if someone is being paid more, I want to see value for money, so if his living arrangements turn out to be impacting his ability to do his job at any point, then I for one will be calling him to account.’ Luke Hildyard, director of the High Pay Centre campaign group, added: ‘Having to pay such a vast sum to change the contract of your own chief executive is highly unusual behaviour by Royal Mail and shows very generous largesse that it is difficult to imagine being extended to the company’s wider workforce.
‘Cases like this make privatisation look like a self- enrichment scheme for top executives in the eyes of the wider public.’
A spokesman for the CWU postal workers union said: ‘These arrangements are obscene and it will be interesting the first time Mr Back pleads poverty when we discuss reward for our members or request more investment in growth. Royal Mail is the people’s service and not a cash cow for the few. This is unacceptable. Royal Mail has many questions to answer to their employers, shareholders and the British public.’
Royal Mail was founded in 1516, but in 2011 the Government announced that it would begin privatising it and shares would be sold to investment companies and ordinary investors. It was fully privatised in 2015. This was controversial as critics said the Government had sold its stake too cheaply at a loss to taxpayers. After 2010 the business was run by Canadian Dame Moya, 63, who was one of only seven female FTSE 100 chief executives before she announced her decision to quit Royal Mail earlier this year.
The company announced that Mr Back, who was previously chief executive of Royal Mail subsidiary GLS, would take over.
It immediately sparked controversy as Mr Back – who had never run a stock market-listed company before – was to be paid 17 per cent more than his female predecessor, with a basic salary of £ 640,000 compared to Dame Moya’s £548,000.
Details of his deal revealed he would also continue living in Switzerland. He has lived there with his family for more than ten years, and his youngest child is still in full-time education. But Mr Back will regularly fly to Britain to run Royal Mail from its London headquarters.
In July 2017, ahead of him being appointed the new chief executive, Royal Mail paid him the £5.8 million supplement to get him out of his old GLS contract, drawn up when he joined the firm after it took over the parcel arm in 2010. Investment groups have advised shareholders to vote against the mammoth pay deal at the company’s annual meeting
today. Meanwhile Royal Mail says Mr Back will use scheduled commercial flights to travel directly between Zurich and London, and will pay for his own flights as well as his accommodation in London.
The company said his previous GLS contract, which triggered the huge buy-out, gave him a high level of management control, required only three months’ notice and included substantial termination payouts. It claims the windfall was not related to his new role as Royal Mail chief executive.
Royal Mail says Mr Back will pay full UK tax on all his Royal Mail earnings and insists the GLS contract needed to be replaced because some of the provisions were out of date. The £5.8million payment was to cover Mr Back for payments guaranteed under his previous deal. A spokesman added: ‘Like any other major business our senior executives are highly committed and very mobile, irrespective of where they live. Their first and foremost commitment is always to their normal place of work, which for board directors is London.’
Cliff Weight, a director of individual shareholder group ShareSoc, said: ‘I always thought that being a chief executive and being paid millions was a 24/7 job. I am amazed they could not recruit somebody from the millions of people who live in the UK.’ He added he was angry that the details of Mr Back’s £5.8million payout had been buried on page 144 of the company’s annual report, vowing: ‘I will report them to the financial Reporting Council.’