Royal Mail PLC (LON:RMG) shareholders have voted against the postal operator’s pay packages for senior executives, including new boss Rico Back.
At the company’s annual general meeting in Sheffield on Thursday, some 70% of investors rejected the remuneration report.
Royal Mail's remuneration committee chair, Orna Ni-Chionna, said: "We are very disappointed that the advisory vote on the DRR [directors' remuneration report] was not carried."
Ahead of the AGM, influential investor advisory firms ISS and Glass Lewis urged shareholders to vote against the pay packets.
Advisory firms against new CEO's pay
The advisory firms lashed out against Royal Mail’s decision to pay a higher salary to newly appointed chief executive Back than his predecessor Moya Greene. They are also against a £900,000 pay-off for Greene.
Back, who joined the company in June, is being paid an annual salary of £640,000, which is £100,000 more than Greene received as chief executive.
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Royal Mail said the extra pay makes up for a lower cash pension allowance and that Back's total fixed pay and benefits match those of Greene’s.
ISS said in a document outlining its recommendations for voting at the AGM: “Support for the remuneration report is not considered warranted due to termination payments to the former CEO which exceed UK market norms and also include an element of guaranteed bonus payments.
“The company's treatment of the former CEO's bonus is not considered to be on a cost-neutral basis for shareholders and the disclosures in previous years have fallen short of accurate representation on termination provisions that have now fallen due.”
“Finally, the newly appointed CEO's salary is at a level higher than that of the outgoing CEO.”
Royal Mail to consult further with shareholders
Royal Mail's Ni-Chionna said the group understands the reasons shareholders felt they could not vote in favour of the remuneration report this year.
The company will consult with the shareholders further as part of a review of the remuneration policy that is due to take place in autumn.
Ni-Chionna added: "The incoming CEO's pension entitlement is lower and the salary is higher than the retiring CEO. We did not feel it was appropriate to reduce the fixed pay for this very demanding role."
New boss to commute to London from Zurich
Back has decided to commute to London from Zurich where he has been living with his family for the past 10 years. Royal Mail said he would pay full UK tax on all of his earnings, including bonus payment.
He will also pay for the costs of travelling between Zurich and London, including flights and hotels.
“Given that his main place of work is here, he clearly doesn't commute back and forth every day,” Royal Mail said in a statement.
“Like any other major business, our senior executives are highly committed and very mobile, irrespective of where they live.”