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Shareholder pay revolt 'embarrassed' Royal Mail bosses, MPs hear Shareholder pay revolt 'embarrassed' Royal Mail bosses, MPs hear
(about 2 months later)
A Royal Mail director has admitted the company’s management was “embarrassed” by its failure to engage with shareholders before a large-scale pay revolt in July, as MPs described as “astounding” a £5.8m payout to secure a new chief executive.A Royal Mail director has admitted the company’s management was “embarrassed” by its failure to engage with shareholders before a large-scale pay revolt in July, as MPs described as “astounding” a £5.8m payout to secure a new chief executive.
Orna Ni-Chionna, the head of Royal Mail’s pay committee, said she had been taken by surprise at the strength of opposition to the pay deal offered Rico Back and leaving package for his predecessor as chief executive Moya Greene.Orna Ni-Chionna, the head of Royal Mail’s pay committee, said she had been taken by surprise at the strength of opposition to the pay deal offered Rico Back and leaving package for his predecessor as chief executive Moya Greene.
Nearly three-quarters of investors refused to support the company’s remuneration policy in one of the biggest pay revolts in UK corporate history at Royal Mail’s annual meeting in July.Nearly three-quarters of investors refused to support the company’s remuneration policy in one of the biggest pay revolts in UK corporate history at Royal Mail’s annual meeting in July.
In a bruising encounter with the cross-party business, energy and industrial strategy select committee on Tuesday, Ni-Chionna said: “Obviously, that was a huge disappointment and a shock to us. We were lulled by the fact that we thought we’d explained it well [to investors]. That is the mistake that we made.”In a bruising encounter with the cross-party business, energy and industrial strategy select committee on Tuesday, Ni-Chionna said: “Obviously, that was a huge disappointment and a shock to us. We were lulled by the fact that we thought we’d explained it well [to investors]. That is the mistake that we made.”
The committee was critical of Royal Mail’s decision to pay Back a £5.8m “golden hello” for breaking an existing contract with an European subsidiary, GLS.The committee was critical of Royal Mail’s decision to pay Back a £5.8m “golden hello” for breaking an existing contract with an European subsidiary, GLS.
Ni-Chionna said Royal Mail had been keen to retain Back within the group, and confirmed the payout was not subject to tax in the UK.Ni-Chionna said Royal Mail had been keen to retain Back within the group, and confirmed the payout was not subject to tax in the UK.
Rachel Reeves, the Labour MP who chairs the committee, said it was “a woeful tale” of poor shareholder engagement at Royal Mail, which was privatised in 2013.Rachel Reeves, the Labour MP who chairs the committee, said it was “a woeful tale” of poor shareholder engagement at Royal Mail, which was privatised in 2013.
“Royal Mail failed to consider any alternative to Rico Back as their new chief executive and splashed out £5.8m on breaking his contract, a sum that could have hired 252 postmen and postwomen,” she said.“Royal Mail failed to consider any alternative to Rico Back as their new chief executive and splashed out £5.8m on breaking his contract, a sum that could have hired 252 postmen and postwomen,” she said.
“We heard that no UK tax was paid on this astounding multimillion-pound deal, a sum paid for by UK customers as they post their letters and parcels, and an amount which would appal postmen and postwomen and the wider public.”“We heard that no UK tax was paid on this astounding multimillion-pound deal, a sum paid for by UK customers as they post their letters and parcels, and an amount which would appal postmen and postwomen and the wider public.”
Royal Mail was accused of being in thrall to its chief executives rather than considering the needs of shareholders.Royal Mail was accused of being in thrall to its chief executives rather than considering the needs of shareholders.
“Why is it that you and your [pay] committee just go weak at the knees when it comes to a powerful chief executive?” asked the Labour MP Peter Kyle.“Why is it that you and your [pay] committee just go weak at the knees when it comes to a powerful chief executive?” asked the Labour MP Peter Kyle.
Ni-Chionna, who is also deputy chair of the National Trust, said the company had learned lessons, adding: “I’m very aware that Royal Mail is a very special company. We mean a lot to people. Our postmen and women mean a lot to people.Ni-Chionna, who is also deputy chair of the National Trust, said the company had learned lessons, adding: “I’m very aware that Royal Mail is a very special company. We mean a lot to people. Our postmen and women mean a lot to people.
“I really am embarrassed that we got this engagement with shareholders so wrong and I want to assure the committee that we won’t do that again.”“I really am embarrassed that we got this engagement with shareholders so wrong and I want to assure the committee that we won’t do that again.”
In the same session on executive pay, the transnational consumer goods company Unilever said it had failed to listen to shareholder concerns by pressing ahead with the ill-fated plan to move its headquarters from London to Rotterdam.In the same session on executive pay, the transnational consumer goods company Unilever said it had failed to listen to shareholder concerns by pressing ahead with the ill-fated plan to move its headquarters from London to Rotterdam.
The firm had learned lessons less than two weeks after it was forced to scrap the plans, MPs were told.The firm had learned lessons less than two weeks after it was forced to scrap the plans, MPs were told.
Peter Newhouse, director and executive vice-president for reward at Unilever, was asked whether the company had a poor track record of listening to shareholders – after more than a third voted against the firm’s pay policy in May.Peter Newhouse, director and executive vice-president for reward at Unilever, was asked whether the company had a poor track record of listening to shareholders – after more than a third voted against the firm’s pay policy in May.
“I understand what you’re saying,” he said. “It sounds like a sensible way of looking at it.”“I understand what you’re saying,” he said. “It sounds like a sensible way of looking at it.”
Royal Mail has a pay ratio of 78 to one, when comparing Greene’s £1.8m pay package as chief executive with the £23,000 average starting pay of a postal worker.Royal Mail has a pay ratio of 78 to one, when comparing Greene’s £1.8m pay package as chief executive with the £23,000 average starting pay of a postal worker.
UK pay growth rises to 3.1%, the highest in almost a decade
Reeves said the ratio at Unilever was 315 to one, more than twice the FTSE 100 average of 146 to one. Last year the chief executive, Paul Polman, received a pay package worth €11.7m (£10.3m).Reeves said the ratio at Unilever was 315 to one, more than twice the FTSE 100 average of 146 to one. Last year the chief executive, Paul Polman, received a pay package worth €11.7m (£10.3m).
At Unilever’s annual shareholder meeting in the UK in May, 36% voted against a pay policy that could hand bigger bonuses to Polman and his senior colleagues.At Unilever’s annual shareholder meeting in the UK in May, 36% voted against a pay policy that could hand bigger bonuses to Polman and his senior colleagues.
After the select committee hearing, Reeves said: “Companies need to pay much more attention to their shareholders, workers and the public when they set chief executive pay.After the select committee hearing, Reeves said: “Companies need to pay much more attention to their shareholders, workers and the public when they set chief executive pay.
“As a committee we will continue to take a close eye to the issue of corporate pay and examine what impact government action, such as pay-ratio reporting, is likely to have on delivering fair pay.”“As a committee we will continue to take a close eye to the issue of corporate pay and examine what impact government action, such as pay-ratio reporting, is likely to have on delivering fair pay.”
Both firms admitted they had yet to respond to shareholder concerns over pay raised at their annual meetings, but said they would meet investors and publish a statement of action in the coming months.Both firms admitted they had yet to respond to shareholder concerns over pay raised at their annual meetings, but said they would meet investors and publish a statement of action in the coming months.
Executive pay and bonusesExecutive pay and bonuses
Royal MailRoyal Mail
UnileverUnilever
Rachel ReevesRachel Reeves
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