https://www.ft.com/content/d5b61604-839 ... 565ec55929Leading advisers recommend investors vote against new chief’s salary at annual meeting
Royal Mail’s decision to pay a higher salary to Rico Back, its new chief executive, than that of his predecessor has been criticised by two leading shareholder advisers, which called on investors to vote against the British postal group’s remuneration plan.
Institutional Shareholder Services and Glass Lewis, the world’s largest and most influential proxy advisers, have recommended that shareholders reject Royal Mail’s pay report at its annual meeting this month.
As well as Mr Back’s increased base salary, ISS flagged concern that Moya Greene, the former chief executive, who will step down from the board this month before retiring in September, is set to leave the FTSE 100 group with a pay-off of more than £900,000. It argued this exceeded UK market norms.
“The company’s treatment of the former CEO’s bonus is not considered to be on a cost-neutral basis for shareholders and the disclosures in previous years have fallen short of accurate representation on termination provisions that have now fallen due,” ISS added in a report for clients.
Glass Lewis said that since Mr Back was appointed with a salary that was 16.8 per cent higher than Ms Greene, at £640,000, it could not recommend supporting the pay report.
In response, Royal Mail said it had sought to ensure broadly the same level of overall fixed cash remuneration — which includes base salary, pension entitlements and benefits — for Mr Back and Ms Greene. The new chief executive’s bigger base salary was to compensate for the almost halving of a cash pension allowance.
The company added that Mr Back’s variable pay was subject to meeting “stringent” performance conditions. “In the event that this extra pay is awarded, significant shareholder value would have been created,” it added.
But Glass Lewis advised shareholders to question the “appropriateness of the increase”.
“An increase to base salary has a compounding effect on the amount of short and long-term incentives granted to an executive, since such awards are often granted as a fixed percentage of base salary,” it added.
Royal London Asset Management, one of the company’s smaller shareholders, with a 0.44 per cent stake, will vote against the remuneration report.
It said: “We have serious concerns regarding the decision to appoint a new CEO on a salary substantially above that of their predecessor and that remuneration remains geared towards short rather than long-term performance”.
Royal Mail also defended the “golden parachute” for its former boss: “Moya Greene is an exceptional executive and we have made the right remuneration arrangements to reward the generation of shareholder value in the longer term and to honour our contractual obligations.”
Despite its criticism, ISS acknowledged that Royal Mail’s chief executive total pay was just 0.63 times the median of peers. The median pay for FTSE 100 bosses fell to £3.45m in 2016, according to the High Pay Centre think-tank. Ms Greene’s total pay package was £1.8m in 2017-18.
ISS also recommended that shareholders reject the re-election of Peter Long as chairman, saying that his “significant number of other board mandates [raised] questions as to his ability to devote the necessary time required to Royal Mail”.
Mr Long is also deputy chairman of tourism group Tui’s supervisory board, executive chairman of estate agents Countrywide and non-executive chairman of Spanish leisure parks operator Parques Reunidos. He could not be reached for comment.
Royal Mail said it believed that Mr Long provided “the appropriate time commitment required” for his duties and that its board considered there was no impact on his role or performance as a result of external directorships.