Royal Mail was humiliated yesterday after the multi-million pound pay packet for the company’s new German boss was rejected in one of Britain’s biggest shareholder revolts.
Around 70 per cent of investors in the privatised company voted against a deal that could hand chief executive Rico Back around £2.7million.
Mr Back was dubbed ‘the flying postman’ as he will not relocate to the UK.
The scale of the stunning rebellion at yesterday’s annual general meeting forced Royal Mail to perform a U-turn and pledge to review the policy.
The company also admitted that Mr Back, who lives in Switzerland, could be in Britain as little as one day a week while performing his chief executive role.
The pay revolt will not affect the controversial £6million given to him for changing his contract when he worked for GLS, Royal Mail’s parcel business in continental Europe.
Around 70 per cent of investors in Royal Mail voted against a deal that could hand chief executive Rico Back (pictured) around £2.7million
Alan Tate, a member of the Communication Workers’ Union’s executive committee, who was among only around 40 people present at the AGM in Sheffield, queried Mr Back’s ‘ability to do the job’ while based abroad.
Questioning Royal Mail chairman Peter Long about the issue, he said: ‘If it impacts on his ability to do the job, there’s a possibility it could impact on the share price, if not the 159,000 staff who work for Royal Mail.’
He also said the pay policy was ‘quite generous given the fact that we’re going into a new administration’.
Mr Long replied that Mr Back’s total fixed pay would be ‘exactly the same’ as that of previous chief executive Dame Moya Greene.
He added: ‘We’re very clear we need to pay that level of fixed remuneration to get a high calibre person like Rico to be chief executive.’
Defending Mr Back’s decision not to relocate to the UK with his family, Mr Long said: ‘Rico is totally committed.
The company also admitted that Mr Back, who lives in Switzerland, could be in Britain as little as one day a week while performing his chief executive role. File image used
‘He’s happy to be based in London as and when requested. His business residence is in London, he’s here every week.
‘He travels around the world in Europe and America [where Royal Mail has a subsidiary]. There’s no debate in terms of Rico’s loyalty and to be in the right place at the right time.’
Royal Mail says father-of-four Mr Back, 64, will use scheduled commercial flights to travel directly between Zurich and London, and will pay for his own flights as well as his accommodation in the UK.
Speaking after the AGM, Mr Tate, whose members at Royal Mail earn an average salary of only £28,274, said: ‘There are going to be some difficult challenges for Rico in operating from Switzerland.
‘Also, he’s got no experience in post deliveries as GLS is a parcels company.
‘His £6million fee is deplorable. If our members were to transfer roles within Royal Mail, would we get that sort of payment? I think not.’
Labour MP Peter Kyle, a member of the Business, Innovation and Skills select committee, said last night: ‘I’m warning Royal Mail to tread very carefully because they are the first company in this position since the Government and Parliament made it crystal clear that they expect executives to act when shareholders exercise their right to criticise and engage on the issue of executive remuneration.
‘It’s not too late for them to think again.’
Mr Kyle, the MP for Hove, said the days of executives with pay and living arrangements like those of Mr Back, who he called the ‘flying postman’ due to his commute from Switzerland to London, ‘belong in the last century’.
Royal Mail was founded in 1516, but in 2011 the Government announced that it would begin privatising it and shares would be sold to investment companies and ordinary investors.
It was fully privatised in 2015. Critics said the Government had sold its stake too cheaply at a loss to taxpayers.
Controversy: Ahead of the firm’s annual general meeting today, investor advisory firms ISS and Glass Lewis urged shareholders to vote against the company’s remuneration report
Any firm which is listed on the stock market must allow its shareholders to vote on the pay of senior staff and the positions of board members.
Often these votes are not binding, as at yesterday’s Royal Mail AGM, but they send a message to the company that their strategy is wrong.
Despite outrage at large pay deals, major revolts are rare. The biggest in recent history came when 80 per cent of shareholders voted against the bonuses handed to Royal Bank of Scotland executives in 2009, at the height of the financial crisis.
The 70 per cent vote against the pay at Royal Mail makes it the second largest in modern history.
About 20 per cent of Royal Mail is owned by workers, who were offered shares in the firm at the time of privatisation, and small shareholders. According to Reuters, the ten biggest shareholders are pension and finance firms based in the UK and overseas.
The Royal Mail said it will ‘consult very closely’ with shareholder representative bodies before announcing its revised plans in the autumn.
Can shareholders really curb the fat cat paydays?
Pay for bosses of stock market-listed companies is set each year by members of the board. Shareholders have been able to vote on these pay deals since 2002.
Until recently this was only an advisory vote, meaning the firm could ignore it.
However, in 2012 the then-business secretary Vince Cable said companies had to have binding votes on executive pay every three years.
This gives investors the chance to have their say and force a change in pay policy.
But shareholder revolts over pay in advisory votes are common and bumper wage deals have continued. These include the £70million handed to then-WPP boss Sir Martin Sorrell in 2016 and the £131million potential payout to Persimmon boss Jeff Fairburn last year.
After she became PM in July 2016, Theresa May said there should be binding annual votes on executive pay.
Last week City watchdog the Financial Reporting Council, in a new code for behaviour, said firms should consider the reputational risk of huge pay packets.
However no new rules have been put in place. The vote at Royal Mail was not binding, so there is no obligation to change Rico Back’s pay.