Parent company to ask loss-making Royal Mail shareholders to boost CEO’s bonus
Royal Mail’s owner has been accused of rewarding failure as the boss looks set for a massive bonus despite the business claiming ongoing losses, angling to slash second-class deliveries, hiking stamp prices and continually failing to meet delivery targets.
And GCA CEO Amanda Fergusson points out the move comes almost a year after industry watchdog Ofcom said “what’s the point of fining a loss-making company more than £5.6million, even though their delays caused the public ‘significant harm’.”
This month parent company International Distribution Services (IDS) intends to ask shareholders to approve increasing CEO Martin Seidenberg’s maximum bonus by £300,000 which would see him take home over £3m, more than twice his pay packet last year.
Andrew Speke at the High Pay Centre think-tank told the Daily Mail’s This Is Money team that Martin Seidenberg’s “significant” pay rise after the company’s “much publicised failings with Royal Mail” was “an indictment of the failed model for rewarding executives that currently exists in the UK”.
David Falkner, director of Cardology and a GCA council member who has been heavily involved in the association’s campaign to safeguard Royal Mail, has not held back in sharing his views with those in Government.
Having written to Justin Madders, MP and parliamentary under-secretary of state (minister for employment rights, competition and markets); Gareth Thomas, MP and parliamentary under-secretary of state (minister for services, small business and exports); and Natasha Irons, MP for Croydon East where Cardology is based, voicing his deep concerns about the planned 22% rise in the cost of first-class stamps David has sent a follow-up letter in which he states: “These concerns are now compounded by recent reports that Royal Mail plans to increase their CEO’s pay by up to £300,0001, despite the company’s ongoing failure to meet service targets. This clear disconnect between performance and executive remuneration is deeply troubling.”
As David told PG Buzz: “It’s ironic that Ofcom thought it was futile imposing a monetary penalty on Royal Mail for missing targets because it’s already losing money, yet the company can now afford to throw even more cash it supposedly doesn’t have at the chief executive who has overseen the decline.
“Of course, in the same ruling back in November, Ofcom also found RM’s senior management didn’t deliberately prioritise parcels – although, as Mr Seidenberg essentially admitted in an interview last week, that means they just forgot how to look at operational dashboards.”
In May this year, the watchdog revealed that Royal Mail had missed delivery targets again, and is still investigating to see if any exceptional circumstances outside its control had contributed to the problems, although it had only slightly improved on the previous year which was marred by the long-running industrial action, extreme weather and the Stansted Airport runway closure.
As the designated universal service provider, RM must deliver letters six days a week to all addresses in the UK for the same affordable price, and 93% of first-class mail has to arrive within one working day while the second-class target is 98.5% delivered within three working days.
In 2022-23 it managed 73.7% and 90.7% of deliveries on time respectively, which were adjusted to 82% and 95.5% when the problems were taken into account, while the 2023-24 figures were 74.5% – missing the target by almost 20% – and 92.4% despite settling the pay dispute with the unions in July 2023.
Ofcom is considering what steps RM has taken to improve its performance since the previous investigation, any impact these measures have had on the quality of service, and what Royal Mail has done to “improve its control, visibility and oversight” of delivery offices.
The news of the CEO’s bumper pay day comes just 10 days after Ofcom recommended cutting Saturdays out of the second-class delivery schedule and possibly trimming back further to an every other day service following its The Future Of The Postal Service review.
The next day Royal Mail compounded the misery for customers by announcing yet another inflation-busting stamp price rise, with first class increasing by 22% to £1.65 despite the current annual inflation rate being just 2.9%, the lowest since March 2021.
It blamed the enormous increase on what the company called the “significant” cost of running the USO, but is currently keeping second class post at the 85p figure which it rose to on April 2 when first-class prices also rose by 10p to £1.35 – already almost double the 2019 price of just 70p, prior to this latest increase.
In its annual report, IDS said it wants to boost Martin’s bonus to “reflect the scale” of the new group chief executive role, which oversees both its European parcels business GLS and Royal Mail – but the IDS board has accepted a total £5billion takeover offer for the 508-year-old British institution from Czech billionaire Daniel Křetínský and his EP Group although the deal has yet to be ratified by shareholders and the government has called it in for investigation.
Despite all these issues, Royal Mail shares are now higher than a month ago, having hit their highest point when Ofcom made its recommendations, and significantly up on five years ago when the price was 225.3p in September 2019 against the 341.8p yesterday having hit the heights of 591p in June 2021.
An IDS spokesman said the increased bonus would be “a more appropriate incentive to successfully lead the group through the current challenges and deliver on the opportunities available to both GLS and Royal Mail.
He added: “The group chief executive role is a complex role and it is appropriate that the LTIP (long-term incentive plan) opportunity, which is subject to delivering performance across the portfolio and returns to shareholders, reflects this.”
The move will bring the CEO’s maximum LTIP pay in line with the average for the top 50 FTSE 250 companies, the spokesman said, although the actual sum paid depends on IDS meeting targets on certain financial measures including operating profits and cashflow.
