Second class

MPS warn Royal Mail could be damaged by row over new chief executive’s pay packet

PARLIAMENT’S business select committee has waded into the row over pay for Royal Mail’s new chief executive after a bruising shareholder revolt last week.

Rachel Reeves, chairman of the committee, has written to Orna Ni-chionna, who is chairman of the Royal Mail’s remuneration committee and is responsible for signing off pay deals, to question new boss Rico Back’s pay packet.

It is highly unusual for MPS to get involved in decisions made by private companies, although this is the second time in as many months that large businesses have faced parliamentary scrutiny.

Last month, the Treasury select committee said TSB boss Paul Pester had “not been straight with” MPS and customers about the bank’s recent IT meltdown, and called for the board to consider whether he should quit.

Mr Back was appointed earlier this year to replace former Royal Mail chief executive Moya Greene. He had previously headed Royal Mail’s overseas parcels division GLS.

It later emerged that the company would pay him 16.8pc more than Ms Greene had received, although Royal Mail said the difference helped offset Ms Greene’s benefits in areas such as her pension. He also received £5.8m when his existing contract was terminated and he was moved onto the new deal.

Royal Mail faced shareholders’ ire at its annual general meeting last week when 70pc voted against the deal but because the vote was non-binding, the board can still implement the terms of the contract.

Ms Reeves wrote to question the decision and asked how Mr Back’s remuneration was decided as part of a wider inquiry into executive pay that the select committee has been carrying out.

“At a time when there are ever louder criticisms of hikes in executive pay, it seems incredible that the remuneration committee chairman would sign off on such a pay deal,” she wrote.

She also suggested the company would suffer “reputational damage” by pushing ahead with the pay after shareholders rejected it.

“Executive pay needs to be fair and it should reflect the views of its shareholders,” she added.

In her response, Ms Ni-chionna said the termination payment was because Mr Back had been employed via a contract in place since 2000, when Royal Mail was in state ownership, and that shareholders had been consulted on the wider pay policy.

She acknowledged that the company “did not communicate well enough over the years with our major shareholders” on some terms of the pay deals. She had since written to Royal Mail’s largest shareholders to request a meeting to discuss their concerns, she revealed.