Now investors tell Royal Mail to tame fat cats

TOP investors are calling on Royal Mail to slash fat cat pay after it axed the dividend. The former state monopoly decided to cancel its final payout to investors last month, to help bolster its balance sheet against the coronavirus outbreak. Its move also hit postal workers, who were given shares in Royal Mail when it was floated on the stock market seven years ago. But it now faces pressure from shareholders to introduce similar belt-tightening measures for executives, and has said so far only that its pay committee will consider the matter ‘in the normal way’.

Schroders, Royal Mail’s biggest shareholder with 15.3pc, has warned companies that it expects dividends to be cut and for the ‘pain to be shared by management’.

It is understood that the UK’s biggest asset manager intends to raise the issue with all the companies it is invested in. Schroders boss Peter Harrison has agreed to donate a chunk of his own pay to charities fighting the pandemic. Another top ten shareholder said the firm’s decision in March to cancel the dividend would inevitably prompt questions about executive pay, adding: ‘Royal Mail needs to explain how its executive pay arrangements will reflect this change as well as any significant changes made to the pay of its wider workforce.’

The moves pile yet more pressure on Royal Mail to cut fat cat pay. Rico Back, the chief executive, can earn up to £2.7m a year. He was recently criticised after this newspaper revealed he is running the company from his penthouse in Switzerland while the UK lockdown continues.

The issue of pay has been repeatedly highlighted by the Mail’s Time to End Fat Cat Pay campaign, with companies such as BT, Rolls-Royce, ITV, British Gas owner Centrica and British Airways owner IAG reducing bosses’ pay. Sir Vince Cable, the business secretary who oversaw the firm’s privatisation in 2013, has backed calls for pay cuts as well.

The controversy at Royal Mail comes after the company faced a shareholder revolt over the package given to Back, 66, in 2018, when he was handed £6m for changes made to his contract.

Keith Williams, the former boss of British Airways, is Royal Mail’s current chairman and Lynne Peacock, former boss of Woolwich building society, chairs the pay committee.

Royal Mail said yesterday: ‘Executive remuneration matters will be considered by the remuneration committee in the normal way as part of our year-end process. We are aware of the position adopted by various shareholder representation groups.’