The new chief executive of Royal Mail Group has been paid nearly £6m to buy him out of his contract in a move that could spark fury among former state-owned company’s trade unions and shareholders.
Sky News has learnt that the board of Royal Mail has handed Rico Back, the veteran boss of GLS, its parcels division, the multimillion pound sum to compensate him for payments he had been guaranteed under his previous deal.
The €6.6m (£5.8m) sum will be disclosed by Royal Mail in its annual report, which will be published in the next few weeks, according to insiders.
However, Sky News can reveal that the company paid the money to Mr Back last July, nine months before a formal announcement on 20 April that he would replace Moya Greene as Royal Mail’s boss.
In the section of that statement relating to Mr Back’s remuneration arrangements, the company said he would receive a base salary of £640,000 and total fixed pay and benefits of £790,000.
It added that Mr Back’s annual bonus opportunity would be equivalent to that of Ms Greene, but included no reference to the additional £5.8m payment it had already made to him.
The new chief executive’s remuneration arrangements have not previously been disclosed because he has not been on Royal Mail’s board during his long career with the company.
One person with knowledge of the payment said there had been a debate in Royal Mail’s boardroom about whether, and when, to make the one-off award public.
News of the payment to Mr Back threatens to overshadow Royal Mail’s full-year results announcement on Thursday, which will follow a recent surge in its share price to a new record high.
It could also put pressure on Peter Long, Royal Mail’s chairman, given the sensitivity of pay at a company that was in state ownership until just under five years ago.
A number of FTSE-100 companies, including Persimmon, the housebuilder, and consumer goods giant Unilever have seen big pay revolts at their annual meetings in recent weeks.
Ms Greene, who steered the company through its controversial £3.3bn privatisation, is regarded as having done an accomplished job by navigating complex pension and working practice negotiations with Royal Mail’s workforce.
She will step down as chief executive on 31 May and leave the company in September.
According to a source close to Royal Mail, the decision to make the €6.6m payment to Mr Back was motivated by many of the terms within his previous contract, including “certain management control rights” over GLS’s board.
In addition, he only had a three-month notice period and was entitled to “substantial payments for termination of his employment in certain circumstances”, the source added.
Mr Back is understood to have seen his fixed pay reduced alongside the deal to buy out his previous contract.
His selection as Ms Greene’s successor underlined the extent to which Royal Mail’s board believes that parcels represent the central future growth engine for the group.
The founder of German Parcel in 1989, Mr Back’s company was bought by Royal Mail a decade later, and rebranded as GLS, or General Logistics Systems.
Royal Mail’s privatisation in 2013 by Sir Vince Cable, the then Business Secretary, was a landmark but controversial move by the Government.
It drew criticism for undervaluing the company, ended centuries of state ownership and was expected to position the company more adeptly to contend with the threats from Amazon and digital competitors at a time of sharp declines in its letters business.
Thousands of employees who retained the shares they were handed during the sell-off will be able to sell them on a tax-free basis from this autumn.
Ms Greene was reported during that period to have felt badly let down by the Government, after being forced to repay a £250,000 housing allowance in the wake of her relocation from Canada.
Since then, she has largely remained in the bottom quartile of pay for FTSE-100 bosses, even as she has been broadly praised for her stewardship of the company.
Royal Mail’s shares closed on Wednesday at 597.8p, giving it a market value of about £6bn.
(c) Sky News 2018: Royal Mail board hands ‘secret’ £6m payment to new chief