UK Royal Mail chief faces bonus backlash

Adam Crozier, the 41-year-old chief executive of Royal Mail, is expected to embark on a collision course with union officials this week when it emerges that he was paid nearly GBP 3 million last year.

The amount will be disclosed with the publication of the state-owned organisation’s annual results. It is thought to be the largest sum paid to the director of a government-controlled concern and puts Crozier on a par with the chief executives of some of Britain’s largest privately owned companies.

Royal Mail will also reveal that it paid more than Pounds 1m to Elmar Toime, the former executive deputy chairman who was ousted last October. Crozier’s board colleagues will also receive large bonuses. The payouts will infuriate many customers who still believe the company has failed to improve the quality of its service.

The size of the pay packets is likely to overshadow a strong set of financial results from Royal Mail, chaired by Allan Leighton, former chief executive of Asda. Annual operating profits for the last financial year will top GBP 500 million, and each postman or postwoman will receive an annual bonus of more than GBP 1,000.

Crozier’s pay includes basic salary, a cash bonus and pension payments. However, the largest part of last year’s pay-out which is expected to be between GBP 2.7 million and GBP 2.9 million comes from the long-term incentive plan.

So-called LTIPs are common at public companies, but are unusual in the state-controlled sector. They were put in place at Royal Mail by Leighton when he joined three years ago in order to attract top managers and were approved by the government. His plan meant that bonuses would be paid if the company made operating profits of more than GBP 400 million in the third financial year.

The amount each executive director gets is ultimately decided by the remuneration committee of the board. It is chaired by David Fish, a nonexecutive director and former Mars executive.

According to Royal Mail’s last pay disclosure, Crozier was on a basic salary of GBP 500,000 and was offered an annual cash bonus of GBP 300,000. Because service performance was so poor last year, Crozier, Leighton and Toime agreed to waive or defer parts of their bonuses for the 2003-4 financial year. Leighton receives only Pounds 20,000 a year and is entitled to a bonus of up to Pounds 180,000.

Before joining Royal Mail in February 2003, Crozier had been chief executive of the Football Association and was responsible for recruiting Sven-Goran Eriksson as England team manager.

In contrast to Toime’s severance pay-off of Pounds 1m, postal workers do not receive any severance pay if they take redundancy with less than two years’ service.

Toime joined Royal Mail from New Zealand Post and had direct responsibility for the company’s letters division. This was handed over to Crozier last May after the postal group missed all 15 service targets set for it. Crozier was also made chairman of the management board at Royal Mail, a position that had been held by Toime.

Toime’s severance pay-out includes a year’s salary of about Pounds 500,000 and expected bonus payments of Pounds 275,000 and possible relocation compensation to return to New Zealand.

In recent weeks Toime signed up as a consultant to Escher Group, a provider of counter automation and business applications to the postal industry.