Employee shares key to modernising Royal Mail
Royal Mail’s Chief Executive Adam Crozier insisted today an employee share scheme involving a 20 per cent stake for postmen and women was the best way to ensure success for the investment package to modernise the company.
Commenting on a report from the Commons Trade and Industry Committee, Mr Crozier said: "Of course the investment plan in the company and an employee share scheme are linked.
"There is no doubt that the Government is generally supportive of employee share schemes and recognises their importance, and they have made this clear on a number of occasions."
For example Stephen Timms, Chief Secretary to the Treasury, said: "Employee shareholders have a direct interest in the performance of their company and a real stake in its success. Research in both the US and the UK shows there is a clear link between employee share ownership and improvements in productivity."
Mr Crozier said no-one should under-estimate the challenges facing Royal Mail.
"By the end of this financial year, we expect well-equipped, technologically enabled rival companies to have handled at least 2.5 billion letters – about one letter in every seven," he explained. "Royal Mail has to modernise to ensure it can compete successfully. It needs heavy investment in technology but we also have to ensure we bring our people with us as we make major changes to the way we operate.
"The best way to achieve that is with an employee share scheme to motivate our people. That’s why a share scheme is an integral part of the investment plan we have put to our shareholder, the Government. It’s a commercial plan which has been scrutinised in great depth by banks and investment advisers acting on behalf of both the Government and Royal Mail. It’s an integrated plan which argues that the benefit of the investments comes from a committed workforce motivated by owning a real stake in the business.
"We’ve made a case for investment that will increase the value to the shareholder – the Government – of the company it already owns but the case rests on the engagement of our people and we’ re convinced from the huge wealth of evidence available in numerous major companies that an employee share scheme is the best way to the get commitment needed from our people."
Mr Crozier insisted that the investment proposal from Royal Mail did not involve any request for tax-payers’ money to subsidise the company.
"We’ve submitted a robust commercial plan that will give value to the Government, and allow Royal Mail to drive improvements in its performance and efficiency which will provide better service and value-for-money for customers and increase the value of the business which the Government owns," he said.
Mr Crozier added that 90,000 people across the company had supported an employee share scheme – a huge groundswell of backing for the idea.
Ends
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Notes to Editors
• Speech By Stephen Timms MP, Financial Secretary to the Treasury, At The Proshare Conference, 25 November 1999
"This is why employee share ownership is so important to this Government. And this is why we want to encourage more companies to offer all their employees a stake in their business.
"Employee shareholders have a direct interest in the performance of their company and a real stake in its success. Research in both the US and the UK shows there is a clear link between employee share ownership and improvements in productivity. Over time, employees have an incentive to contribute more actively to the development of the business. And if the majority of employees have an ownership stake, then individual efforts become mutually reinforcing.
"Employee shareholders also feel a greater commitment to their company which helps the company recruit and retain employees and improves its return from investment in employee skills and training. Employee shareholders better understand the risks faced by the business, which in turn can lead to greater pay responsibility."
Referring to the new Share Incentive Plan,SIP, he said:
"From what we have heard already, we think the new plan will be very successful. These developments herald a dramatic change in the way many businesses operate, and point towards a new era of partnership between employees, shareholders and managers. They are a key building block for Britain’s future prosperity, for the modern and decent Britain we are working for. Join with us in promoting employee share ownership, so that we can make the most of the benefits which are on offer."
