Royal Mail owner accused of rewarding failure as he plans to increase boss’s pay

The owner of Royal Mail has been accused of “rewarding failure” as it plans to boost its boss’s bonus amid a controversial takeover by a Czech tycoon.

International Distribution Services (IDS) will ask shareholders this month to approve an increase in Martin Seidenberg’s maximum severance pay by £300,000.

This could allow him to take home just over £3m, double what he earned last year, as he oversees the sale of Royal Mail to billionaire Daniel Kretinsky, known as the “Czech Sphinx” for his inscrutability.

A deal would see the 508-year-old postal service placed into foreign hands for the first time since it was established by Henry VIII in 1516. IDS said the move reflected Seidenberg’s “complex” role in leading the business “through current challenges”.

Andrew Speke, of the High Pay Centre think tank, said Seidenberg’s “significant” pay rise after the company’s “highly publicised failures with Royal Mail” was “an indictment of the failed model of executive reward that currently exists in the UK”.

“Sometimes it can seem like senior executives are being rewarded for their failures,” he added.

IDS wants to increase Seidenberg’s long-term incentive plan (LTIP) to 200 percent of his base salary, from 150 percent.

Shareholders will vote on the pay deal at their annual general meeting later this month.

The meeting comes as IDS’s board faces criticism for accepting Kretinsky’s £3.6bn offer despite being close to winning key regulatory reforms he has demanded.

These measures include the elimination of second class deliveries on Saturdays, which could save Royal Mail £300m a year.

Royal Mail has also been criticised for its poor customer service. Last year, regulator Ofcom fined the postal service £5.6m for failing to meet its delivery targets.

In May, the watchdog revealed that Royal Mail had again failed to meet its targets and is investigating whether to issue a penalty.

In its annual report, IDS said it wants to increase Seidenberg’s bonus to “reflect the scale” of the new role as group chief executive, which oversees both Royal Mail and IDS’s European parcel business, GLS.

An increased bonus would be “a more appropriate incentive to successfully lead the group through the current challenges and take advantage of the opportunities available to both GLS and Royal Mail,” an IDS spokesman said.

He added: “The role of group chief executive is a complex one and it is appropriate that the LTIP opportunity, which is subject to the delivery of portfolio-wide performance and shareholder returns, reflects this.”

The move will bring Seidenberg’s maximum LTIP salary in line with the average of the top 50 FTSE 250 companies, the spokesman said.

The amount Seidenberg will be eligible to receive depends on IDS meeting targets on certain financial measures, including operating profit and cash flow.