Royal Mail suffers revolt from 70pc of investors over exec pay

ROYAL Mail has suffered an extraordinary shareholder backlash as 70pc of its investors voted against its pay packets for senior executives.

Investors made their feelings known at the company’s annual general meeting in Sheffield yesterday after it emerged that incoming chief executive Rico Back would be paid 16.8pc more than previous boss Moya Greene.

The vote against the remuneration report is one of the largest in recent history, eclipsing a number of high profile shareholder revolts in the last few months including at Shell and Astrazeneca. However, Royal Mail’s vote this year is not binding – companies only face a binding vote on their pay policies every three years.

Advisory groups had expressed their unhappiness about Mr Back’s pay package ahead of the meeting, with both Institutional Shareholder Services (ISS) and Glass Lewis criticising Mr Back’s £640,000 salary. Royal Mail had defended the decisions made over Mr Back’s pay, saying that it helped offset Ms Greene’s benefits in areas such as her pension. ISS had also raised a red flag over Ms Greene’s payouts on her departure, which included a full-year cash bonus of £774,000.

Such was the disquiet over the state of the company that 34.4pc of shareholders also voted against the re-election of chairman Peter Long, complaining that he holds too many board appointments. The vote against him was not enough for him to lose his position but hints at wider concern about the management of the business. Orna Ni-chionna, chairman of Royal Mail’s remuneration committee, said the business was “very disappointed” with the result of the vote and that since becoming a public company it had taken a “highly responsible approach to executive pay”. Until now, it enjoyed the support of its shareholders, she added.

Ms Greene’s exit package had been in place since 2010 and dates from when the company was in state ownership, Ms Ni-chionna said, although she acknowledged that many shareholders felt that the terms of the exit were not communicated well enough in previous years. Royal Mail floated on the London Stock Exchange in 2013.

Ms Ni-chionna also defended Mr Back’s pay, suggesting his total remuneration was subject to stringent performance tests. “The incoming chief executive’s pension entitlement is lower and the salary is higher than the retiring chief executive,” she said. “We did not feel it was appropriate to reduce the fixed pay for this very demanding role.”