UK Royal Mail in radical shake-up of executives pensions

Royal Mail overhauled its board remuneration policy yesterday in a stinging indictment of previous management.

The loss-making mail operator will no longer pay executives their full pension if they retire before the age of 60, “so that no director benefits from any kind of pension fund top-up”.

Last year, John Roberts, Royal Mail’s previous chief executive, left the company 20 months before his 60th birthday with a pension pay-out of Pounds 161,161 – the same amount he would have received had he left at the end of his term. Royal Mail said such practices were “unrealistically generous. We now have a remuneration scheme that conforms with best practice in corporate governance” as recommended by the government-commissioned Higgs review.

Allan Leighton, the company’s chairman, was behind some of the changes detailed in the annual accounts released yesterday.

But Mr Leighton has also come under pressure for holding nine directorships outside Royal Mail, a position that is not thought compliant with Higgs’ recommendations. Earlier this year he said he had no plans to give any up in the wake of the Higgs report.

The trade and industry secretary, who appointed Mr Leighton in March 2002 and whose approval is needed for other directors, is also thought to be behind some of the changes, which include the rule that no director be on more than a 12-month contract. Since the three-year contract the DTI gave Mr Leighton is subject to annual review, the time limit on contracts is “what they would expect us to do”, Royal Mail said.

The company said it would place much greater emphasis on performance-related pay. Last November it launched an incentive scheme for all employees but yesterday said the scheme “will not pay out a penny to directors and other senior managers if the company does not hit the Pounds 400m profit target” it has set itself for the end of the three-year renewal plan.