I always thought that being a Chief Executive and being paid millions was a 24/7 job. I am amazed the Royal Mail could not recruit somebody from the millions of people who live in the UK. I am very angry that the details of Mr Back’s £5.8million payout were buried in note 26 on page 144 of the company’s annual report and not explained in the first paragraph of the Remuneration Committee Chair’s statement.
Hiding the pay of the new Chief Executive Rico Back in the note 26 on page 144 of the Royal Mail annual report is not very helpful. All companies need to be transparent and open with their shareholders. The two most important decisions the remuneration committee chairman had to make were how much to pay the Chief Executive who was leaving and how much to pay the new Chief Executive. And yet, in the letter to shareholders from the chairman of the remuneration committee neither of these two decisions feature in her first paragraph.
The new FRC corporate governance code stresses the importance of clear and simple remuneration. However, the Royal Mail has clearly decided to pay lip service to the desired intent of the FRC and to follow the letter of the law rather than the spirit of the regulation.
Such were the sort of comments that I gave to journalist Rachel Milliard at the Daily Mail. I even explained that my father worked for 40 years at the Post Office and she asked me how he would have thought about this and I said he would have turned in his grave.
Rachel told me the new CEO is based in Switzerland and does not intend to relocate to the UK. This was when I blew my top. Being CEO is a 24/7 job and you have to be on site to do it properly. Otherwise you don’t know what is being said behind your back. It is bonkers to try and do it from Switzerland. Surely, they could find someone in the UK to do the job.
In my opinion, he has been paid Euro 6.6m in cash as a bung to accept a more modest package and so his pay going forward will look less excessive. Note 26 on page 144 explains he was paid this amount before he became a director, but it was only the related party disclosure forced them to show this in this note!!! Hiding pay in this way is appalling and silly. If he was not being offered the CEO job, he would not have had part of his existing pay arrangements bought out. It would have in due course been received and disclosed in his pay. You have to be a lawyer reading the tiny small print of the law to pretend that this Euro 6.6million payment has not been made as part of his recruitment package as the new CEO.
It is a total disgrace. I and ShareSoc did however get a good quote in the Daily Mail.
We might even think of suggesting they may have a shareholders committee at the Royal Mail. Views?
Turnout on the vote over the pay report was 61 per cent of Royal Mail’s issued share capital. The company will now have to come back with a new, binding pay policy in 2019. The vote is only advisory, i.e. non-binding, so won’t affect what was paid. It is surely time that the remuneration vote was given some teeth and made binding. The current regime means Boards like Royal Mail can ignore what the shareholders want and just carry on in the same way.
The Daily Mail quoted me as saying “I will report them to the Financial Reporting Council. We have just had a new corporate governance code urging people to be more transparent and this is exactly the sort of thing that should not occur.” Having thought further, I wonder whether I should report them to the FCA who require that companies follow the Listing Rules which require companies to say whether they have complied with the Corporate Governance Code or to state what they have not complied with and explain why they did so. Or perhaps I should report them to the Listing Rules Authority, who are responsible for the Listing Rules or the London Stock Exchange. Or perhaps to BEIS who on behalf of Government wrote the remuneration reporting guidelines and are responsible for the Companies Act, which specify the necessary disclosures. It is not at all clear who is the relevant authority to deal with this one. I think I will write to them all and ask them to make sure that someone deals with this issue – fast and firm transparent action is needed. That way I can ask that this hot potato does not slip through the cracks.
Behaviour like this breeds distrust in UK business. Low levels of trust impact on the valuation of companies listed in the UK. The Daily Mail is quite rightfully bringing this to the attention of its readers and in so doing is hopefully helping to stop future excesses.
P.S. their auditors are KMPG.
21 July 2018