Royal mail chairman defends Crozier’s GBP3m windfall

Allan Leighton, the chairman of Royal Mail, launched a stout defence of the bonuses being paid to top managers at the postal service yesterday as it emerged that Adam Crozier, the former Football Association head who took over as Royal Mail’s chief executive, has been awarded a windfall of almost pounds 3m.

The payment is believed to be the largest made to someone running a state-owned entity.

Details of Mr Crozier’s pay are due to be published this week alongside Royal Mail’s end of year figures, which are expected to show a huge jump in profitability, with operating profits up from pounds 220m to more than pounds 500m during the past 12 months.

On top of a pounds 500,000 annual salary and a pounds 300,000 cash bonus, the chief executive has now qualified for a long-term incentive award bringing an additional pounds 2m payment.

The news is likely to anger postal unions, who have had to weather sustained rounds of redundancy under Mr Crozier’s stewardship, and also consumer groups who have criticised the Royal Mail’s record over late deliveries and stolen letters.

But Mr Leighton declared yesterday: “Three years ago Royal Mail was worth zero. Today it is worth around pounds 5bn and the quality of service to our customers is the best in 10 years.”

“That is why the profit we will announce will trigger a share-in-success payment of more than pounds 200m to postmen and women,” referring to the fact that the business’s success in meeting its financial targets will trigger bonuses of around pounds 1,000 for each member of Royal Mail’s staff.

Royal Mail sources noted that this year’s bonus would be based on the performance of the postal business over its three-year turnaround programme, rather than just one year. At the start of the performance period the company was losing around pounds 1.5m every working day.

Meanwhile, reports over the weekend rekindled speculation that Mr Leighton, who built his reputation by turning round the Asda supermarket chain, is planning to take Royal Mail into private ownership. The latest idea is that 51% of the business would be placed in an employee trust, with this part-privatisation being funded by Royal Mail raising pounds 2bn of debt in the City.

But insiders at the postal group discounted the suggestion yesterday, pointing out that Labour’s election mani festo had stated that there were no plans to sell the business. The government is, however, committed to a review of Royal Mail.

The business is about to face arguably its biggest challenge in decades when the postal market in Britain is fully opened to competition at the beginning of next year. Royal Mail is keen to spend on improving its technological capability to match that available to rivals such as Deutsche Post and TNT. It is also keen to improve the return on its near pounds 9bn a year turnover by increasing its efficiency.