Royal Mail is in for a tricky week as its pay row comes to the fore

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Royal Mail is preparing for a tempestuous week ahead, with its interim trading results set for release tomorrow and its annual general meeting (AGM) scheduled for Thursday in the midst of a pay row regarding its incoming and outgoing chief executives.

Long-standing CEO Moya Greene is to step down after the AGM, with the board recommending she receive a £900,000 termination bonus for her services. She will be replaced by Rico Back, the former CEO of subsidiary company GLS, who will receive a £640,000 annual base salary that is 16.8 per cent higher than his predecessor.

Investor advisory groups such as ISS have warned shareholders to oppose Back’s suggested salary due to its unequal nature, and Greene’s bonus, as it is above the amount normally given by British companies to executives on their departure.

Analysts expect tomorrow’s trading statement to be largely uneventful, but have predicted a more major upset in the second quarter due to the impact of May’s General Data Protection Regulation (GDPR) on marketing mail volumes.

Lee Wild, head of equity strategy at Interactive Investor, said:

Letter volumes are expected to keep falling at 4-6% a year, but it could be greater this time if, as expected, new GDPR legislation shrinks the quantity of marketing mail. However, given GDPR came into effect with only one month of the first quarter remaining, the bigger impact is likely to be felt in the second quarter.

Royal Mail’s European logistics business GLS will remain the star of the show, offsetting difficult trading across the rest of the business, although watch out for any impact of higher staff costs on margins.

Meanwhile the work and pensions select committee has applauded Royal Mail over its “new Beveridge”-style proposed collective defined contribution (CDC) pension scheme, releasing a report on the scheme's benefits and disadvantages.

According to the committee, CDCs allow employers to offer staff good pensions based on a target benefit rather than a guarantee, thereby offsetting the long-term liability on their balance sheets.

While the government has indicated its initial approval of the scheme, the committee has urged it to "set out a swift timetable" for enacting CDCs at firms across the country.

[Celgar]

Sounds like the UK government approve of the CDC and big business ditching any responsibility over future pension returns. Apparently 'Beveridge style' refers to funding schemes from past payments by deceased posties.