Cable Vows Fight Over Royal Mail Chief's Pay

By Mark Kleinman, City Editor

An explosive executive pay row is brewing between Vince Cable and Royal Mail over the £1.5m package earned by the newly privatised company's chief executive.

Sky News can reveal that the Business Secretary is preparing to face down moves by Royal Mail's board to hike Moya Greene's annual remuneration just months after the Government sold a 70% stake in the company.

Mr Cable is understood to be willing to consider going as far as using his vote as the postal operator's biggest remaining shareholder to try to block any such increase.

If that were to happen, it would represent a remarkable new chapter in the privatisation of Royal Mail, which was bitterly opposed by Labour and the Communication Workers' Union.

The Government has been heavily criticised since last October's £3.3bn stock market listing, with the company's soaring share price leaving ministers vulnerable to accusations that it had been seriously undervalued.

The conflict over executive pay has been simmering since last weekend, when Donald Brydon, the boardroom veteran who chairs Royal Mail, said in a newspaper interview that increasing Ms Greene's pay was necessary if the company wanted to retain her services.

"I think it's only fair to pay Moya the right market rate for her job," he told The Sunday Telegraph.

"I'm not in the school that says top executive pay is without fault, there are parts of it that are egregious and wrong. But happily we are so far away from that end of it that to try and right-size her a bit I think is a necessary part of making sure we keep her."

Mr Brydon did not quantify the perceived shortfall in the Royal Mail chief's pay, although Ms Greene is paid less in aggregate than any of her peers at the helm of companies in the FTSE 100. She is also paid substantially less than her predecessor, Adam Crozier.

Last year, she received just under £498,000 in basic salary with further sums totalling nearly £1m based on her performance and directors' judgements about her success at modernising the company.

Royal Mail has pledged not to give Ms Greene a significant pay rise until after the current financial year.

Mr Cable is said to be irritated at Mr Brydon's intervention in the context of a row last year which led to Ms Greene returning a £250,000 housing allowance after he objected to the "material" payment.

The sum was disclosed in Royal Mail's annual report last summer. A review of Ms Greene's employment contract by Sky News after the company's flotation found no further discretionary payments of that kind.

At the time, Mr Cable said: "I am pleased that this unapproved payment is being returned. The company acted quickly to rectify the situation.

"A mistake was made in not seeking my approval: I would not have approved it. The chairman is sorry; the payment is being returned. I now regard the matter closed.

"Moya Greene is an exceptionally good CEO and she and the board have my full support to take the company forward."

Under laws passed at Mr Cable's instigation, most listed companies will face for the first time in 2014 a binding shareholder vote on their future pay policies for senior executives.

The prospect of one of the first big protest votes under the new regime being orchestrated by Mr Cable himself would stun the City.

It is not clear whether Mr Cable is opposed to any increase at all in Ms Greene's salary while the Government remains a shareholder in the company, but he is understood to be determined to hold Royal Mail's board to account over the issue.

However, the Business Secretary's stance may leave the Government vulnerable to accusations of hypocrisy given that both Antonio Horta-Osorio and Ross McEwan, the chief executives of state-backed Lloyds Banking Group and Royal Bank of Scotland, are paid far higher sums than Ms Greene.

There is a widespread expectation that ministers will sanction the sale of the remaining stake before next year's general election, which would leave Royal Mail's board answerable only to external investors.

The Business Secretary is said to be keen to avoid the "nuclear option" of using the Government's vote to oppose Royal Mail's remuneration report.

Unions are likely to apply intense pressure on him to do so, however, with Unite national officer Ian Tonks saying this week: "Calls to boost Moya Greene's huge salary even further is proof the rushed privatisation of Royal Mail is descending into a farce. The Government should step in and make clear it opposes this sort of corporate greed."

If Mr Cable did vote against it, it could leave some Royal Mail directors feeling that their positions were untenable because they were not able to act in the interests of all shareholders by securing the services of the company's chief executive.

It would also revive memories of the vote by UK Financial Investments against Royal Bank of Scotland's pay report in 2009 following its taxpayer bail-out, although that vote was only on an advisory basis.

Mr Cable will give evidence later on Wednesday to the Business, Innovation and Skills select committee about the department's annual report, when he may face further questioning about the Royal Mail sell-off.

A spokeswoman for Mr Cable declined to comment.

:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202.

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