UK Royal Mail chiefs share pounds 3.6m despite missed targets

THE TOP directors of Royal Mail received more than pounds 800,000 in bonuses last year even though the organisation missed all 15 of its targets for delivering letters on time, it emerged yesterday.

Adam Crozier, the chief executive, earned a pounds 300,000 bonus, taking his total pay to pounds 664,224, while Elmar Toime, the deputy chairman and the executive directly responsible for the disastrous performance of the letters business, earned a pounds 150,000 bonus on top of his pounds 500,000 salary.

In total, Royal Mail’s five executive directors were awarded more than pounds 3.6m in salaries, annual bonuses and long-term incentives.

The consumer watchdog PostWatch attacked the bonuses at a time when Royal Mail’s performance had “reached the bottom”, while the postal regulatory Postcomm announced an investigation into what it described as a “collapse in quality of service”.

Royal Mail could have to pay pounds 160m in fines and compensation if the regulator rules that it did not use “reasonable endeavours” to meet its performance targets. This would wipe out a large part of the pounds 220m operating profit it made in 2003-04.

In an effort to counter criticisms of the bonus payments, the Royal Mail chairman, Allan Leighton, announced he had deferred all of his pounds 144,000 bonus due last year and would not receive any bonus this year unless the organisation hit its performance target of delivering 92.5 per cent of first class letters the next day.

Royal Mail also said that Mr Crozier and his five fellow executive directors had waived the quality service element of the bonus payments they were entitled to last year.

However, a senior source at Postcomm described this as a “highly cynical, headline-grabbing ploy”. Mr Leighton has to meet only four of Royal Mail’s 15 performance targets and then only in the fourth quarter, when postal volumes are lower and easier to hit. The four targets he has to meet are also regarded as the easiest.

As for the offer to waive bonuses linked to quality of service, the source said: “It is easier to waive something you never received in the first place.”

Mr Leighton maintained that Royal Mail has taken a “very responsible” approach in deferring and waiving bonuses.

“Anything short of our targets is not good enough. In deferring these bonuses, we are saying we have confidence in everyone in Royal Mail achieving our key targets by the end of this year,” he said.

The main target is to make an operating profit of pounds 400m. That will trigger further multimillion-pound bonuses for Royal Mail directors and an across- the-board pounds 800 payment for the company’s 190,000 staff.

Royal Mail blamed the failure to hit its performance targets on last autumn’s wildcat strike action in London. But PostWatch and the regulator rejected that excuse, saying that its performance had continued to decline this year. Only 88 per cent of letters have been delivered on time so far this financial year.

The problem stems from Royal Mail’s decision to introduce a single daily delivery while simultaneously cutting the workforce at its mail centres and making radical changes in the way the post is transported.

Nigel Stapleton, the chairman of Postcomm, said: “Normally, an organisation embarking on a major change of that sort staffs up. They have staffed down which sends a warning signal to us.”