Fury at £6million deal for German Royal Mail chief who’ll keep running the business while living in Switzerland
German executive Rico Back, 64, took over at the company in June this year
The new boss is to be handed £6million to run the business from Switzerland
On top of this, he could get a £2.7million salary in his new role with bonuses
Royal Mail is facing mounting anger over its decision to hand its new chief executive nearly £6million and allow him to run the business while living in Switzerland.
German executive Rico Back, 64, took over at the company in June after previous boss Dame Moya Greene stepped aside.
But critics have questioned why he received almost £6million to buy him out of an old contract he had in his previous job running Royal Mail’s European parcel business GLS.
On top of this, he could get £2.7million a year in his new role, including salary and benefits. The father of four plans to remain living in Zurich in Switzerland with his family.
The huge payouts for the new boss come despite the average worker at Royal Mail, which was privatised in 2015, earning only £28,274. The company employs around 141,000 people in the UK.
Meanwhile, the price of a first-class stamp has increased from 41p in 2010 to 67p today.
Shareholders are expected to revolt against Mr Back’s pay at Royal Mail’s annual general meeting in London today.
Mr Back’s pay and bonus were revealed when he was appointed Royal Mail chief executive in April.
However, details of his £5.8million payment were only declared when the company published its annual report in May – and buried on page 144.
Labour MP Peter Kyle, a member of the Commons Business and Industrial Strategy Committee, said: ‘It’s a slap in the face to postal workers to hear that their new boss seems to have been given everything he could have dreamed of.
‘We are currently doing an inquiry into executive pay and I have heard stories and seen practices that would make anyone’s toes curl – I hope this is not one of them.
‘Royal Mail needs a full-time chief executive and if someone is being paid more, I want to see value for money, so if his living arrangements turn out to be impacting his ability to do his job at any point, then I for one will be calling him to account.’
Luke Hildyard, director of the High Pay Centre campaign group, added: ‘Having to pay such a vast sum to change the contract of your own chief executive is highly unusual behaviour by Royal Mail and shows very generous largesse that it is difficult to imagine being extended to the company’s wider workforce.
‘Cases like this make privatisation look like a self-enrichment scheme for top executives in the eyes of the wider public.’
A spokesman for the CWU postal workers union said: ‘These arrangements are obscene and it will be interesting the first time Mr Back pleads poverty when we discuss reward for our members or request more investment in growth.
is year.
First-class stamps rose by two pence to 67p, while the price of a second-class stamp increased from 56p to 58p. Large letter stamps each rose by 3p. A large letter first-class stamp rose to 101p and the second class version to 79p.
This year’s price rise – which came into force on March 26 – is double that the previous year’s increase of a penny.
The company claims its prices are among the best value in Europe when compared with other postal operators.
A Royal Mail spokesman said in February that it understood that many households and companies were finding it difficult in the current economic climate. However, they stressed the changes would ‘help ensure the sustainability of the Universal Postal Service’.
Royal Mail has been battling a fall in letter volumes for years while its parcel market has been challenged by competition from the likes of Amazon.
‘Royal Mail is the people’s service and not a cash cow for the few. This is unacceptable. Royal Mail has many questions to answer to their employers, shareholders and the British public.’
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. This was controversial as critics said the the Government had sold its stake too cheaply at a loss to taxpayers.
After 2010 the business was run by Canadian Dame Moya, 63, who was one of only seven female FTSE 100 chief executives before she announced her decision to quit Royal Mail earlier this year.
The company announced that Mr Back, who was previously chief executive of Royal Mail subsidiary GLS, would take over.
It immediately sparked controversy as Mr Back – who had never run a stock market-listed company before – was to be paid 17 per cent more than his female predecessor, with a basic salary of £640,000 compared to Dame Moya’s £548,000.
Details of his deal revealed he would also continue living in Switzerland. He has lived there with his family for more than ten years, and his youngest child is still in full-time education.
It is planned that Mr Back will regularly fly to Britain to run Royal Mail from its London headquarters.
Royal Mail’s annual report then revealed a further payout had been given to Mr Back.
In advance of him being appointed the new chief executive, Royal Mail paid him £5.8 million to get him out of an old employment contract.
This previous contract had existed from when Mr Back joined Royal Mail after it took over GLS in 2010. The payment was made in July 2017.
Investment groups have advised shareholders to vote against the pay deal being handed to Mr Back at the company’s annual meeting today.
Royal Mail says Mr Back will use scheduled commercial flights when travelling directly between Zurich and London, and will pay for his flights as well as his accommodation in London.
The company said his previous contract with GLS dating back to 2010, which triggered the buy-out of almost £6 million, gave him a high level of management control, required only three months’ notice and included substantial termination payouts.
It claims the payout was not related to his new role as Royal Mail chief executive.
Royal Mail says Mr Back will pay full UK tax on all his Royal Mail earnings.
It says the contract with GLS needed to be replaced because some of the provisions of the contract were out of date.
The £5.8million payment was to cover Mr Back for payments guaranteed under his previous deal.
A spokesman added: ‘Like any other major business our senior executives are highly committed and very mobile, irrespective of where they live.
‘Their first and foremost commitment is always to their normal place of work, which for board directors is London.’
Cliff Weight, a director of individual shareholder group ShareSoc, said: ‘I always thought that being a chief executive and being paid millions was a 24/7 job. I am amazed they could not recruit somebody from the millions of people who live in the UK.’ He added he was angry that the details of Mr Back’s £5.8million payout had been buried on page 144 of the company’s annual report.. He added: ‘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.’
Royal Mail has also sparked anger among homeowners for scrapping morning post in many parts of the UK. In some areas post is now only delivered in the afternoon.
Interesting commentary attached below this online Daily Mail article:
A PACKAGE THAT'S 100 TIMES THE SALARY OF A POSTMAN
Of all the state enterprises that have passed into private hands since the Thatcherite revolution of the 1980s, only one has the privilege of having ‘Royal’ in its corporate name.
The Royal Mail is not just Britain’s national postal service, with a heritage dating back to the 16th century. It has the exclusive franchise to design, print and distribute Great Britain’s postage stamps, with the Queen’s head always present even on commemorate issues.
The glittering Crown and ER (Elizabeth Regina) is an integral part of the company’s logo and adorns post boxes, postal delivery trucks and sorting offices up and down the country.
The very idea that this uniquely British company should be run by an overpaid German who lives in Switzerland is extraordinary.
This isn’t jingoism on my part. This country long ago came to terms with the idea that the best people, wherever they come from, should be recruited to top jobs. Rico Back’s predecessor as Royal Mail boss, the feisty Moya Greene, moved all the way from Canada to guide the business from government ownership into the private sector.
She made her home in Britain, becoming part of the establishment as a trustee of the Tate gallery among other things. For Rico Back to choose to live in Zurich for family reasons, because of his youngest child’s schooling, shows a lack of respect for this country and the brilliant education choices on offer.
It makes him culturally unsuitable to be chief executive of the Royal Mail. And it also leaves open questions about his tax affairs even though the Royal Mail insists that he will pay British taxes on his chief executive salary and bonuses.
What is even more extraordinary is that a feeble Royal Mail board, chaired by former package holiday king Peter Long, signed off mr Back’s living and financial arrangements. Indeed, in one of the most egregious decisions made by a publicly quoted company, the Royal Mail consented to a £5.8m ‘golden hello’ for Rico Back even though he was already an employee of the group through the GLS European parcel delivery service.
It is bad enough when high-powered executives demand what is effectively a transfer fee for moving from one company to another, especially when they will be getting a high salary. But the public, paying 67p for a first-class stamp, will be horrified to learn that the Royal Mail is paying out millions simply to move a boss from part of the company to another.
A relocation fee might be understandable, but paying out the remains of Back’s contract, when he is already an employee, tramples over business convention, and would be frowned upon in corporate governance circles.
Personally, I was always a huge supporter of Royal Mail privatisation on the grounds that removing the dead hand of government would allow the group to modernise, innovate and adjust to the digital age. The fact that the privatisation was bungled with too low an offer price, and investment banks including Goldman Sachs were able to enrich themselves and their clients while ordinary investors were frozen out was a disgrace. It was heavily criticised by the National Audit Office.
Now we learn that a culture of unfettered greed has swept through the organisation. As well as his golden hello, Rico Back is to receive a base salary and bonuses which could reach £2.9m a year. His total remuneration package amounts to more than a hundred times that of the average postal worker, who takes home £28,274.
That can only serve to antagonise a highly unionised workforce which in recent years has seen many thousands of jobs lost to modernisation, and been forced to accept reductions in their defined salary pensions. Not surprisingly, the Communication Workers Union has already has condemned the arrangements as ‘obscene’. The proposals have also drawn the ire of major shareholder advisory groups which are threatening to vote them down at the Royal Mail AGM today.
Rico Back was chosen for the job because the GLS offshoot, which runs a Europe-wide commercial parcel service, has been very successful in an age of online shopping. But running a national postal service is a very different proposition. In the case of the Royal Mail, standards of customer service have been allowed to deteriorate, while the basic costs remain high because of the legal requirement to offer a universal service.
There must be far-reaching questions as to whether someone who has operated so far from the front line of delivery services in the UK is the right person for the job.
What is absolutely certain is that no other national postal service in the world would even consider handing the keys of a domestically focused business to someone living overseas, with limited knowledge of the status the postal service has in all of our lives.
Cutting the Royal Mail loose from the stays of public ownership was always the right thing. But the British people did not sign up to a privatisation which threatens to destroy core customer service and drives a coach and horses through best governance practices.
Once again, the worst excesses of free market capitalism are playing into the hands of Jeremy Corbyn and the political Left.
