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Post Office Limited
Finsbury Dials
20 Finsbury Street
London
EC2Y 9AQ
Secretary of State
Department for Business, Energy and Industrial Strategy
House of Commons
London
SW1A OAA
30" September 2021
Dear Secretary of State
Iam writing following our ongoing conversations on the topic of an approach
to reward and retention arrangements for Nick Read, Chief Executive Officer of
Post Office Limited. As you know, I believe that we need to address this in a
timely fashion to avoid disruption to the leadership of Post Office Limited. This
letter provides a reminder of the context together with a proposal for your
consideration. I hope this will enable us to move to an agreed way forward.
As you know, Nick Read joined Post Office Limited in September 2019. Since
then, he has led the business through very challenging times, under
significant media scrutiny. He has ensured that Post Office Limited continues
to provide vital services to the community and, notwithstanding the increased
complexities of operating during the pandemic, Post Office Limited ended the
last financial year profitable.
This year he is leading the transformation of the business from a technology,
product, service and colleague perspective, with an unwavering focus on the
importance of the Postmaster. Under his leadership, Post Office now has a
clearly articulated strategic intent to be the operator of a successful,
sustainable, and sought-after franchise and an organisation that colleagues
feel proud to work for.
Nick has set challenging targets for Post Office and his continued leadership is
vital to inspire our colleagues and Post Masters to achieve those targets.
Critically, we also need him to continue to be the face of Post Office Limited as
the Inquiry progresses.
Against this backdrop, it is vital that we ensure that Nick is fairly rewarded
and recognised for his short and long-term contribution.
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Base Pay Positioning
Nick’s current base salary is £415,000. He has not received an adjustment
since joining us in 2019. Each year, we ask our Remuneration Committee
Advisors to carry out benchmarking of our GE positions so that we understand
the competitive positioning of these roles. The benchmarking is against a set
of comparators which have been previously agreed with BEIS. The
comparator group is weighted as follows:
¢ 40% Mails and Retail
e 40% Social Purpose
e¢ 20% Challenger Banks and Mutuals
We have just received the results of this year’s exercise, carried out by our
new Remuneration Advisors, Willis Towers Watson, in line with the agreed
methodology.
The results for the CEO position are shown below, with the market ratios
shown in brackets for each position:
NR package Lower Mid-Market Upper
Quartile Quartile
Base Pay £415,000 £465,000 £545,000 £625,000
(89%) (76%) (66%)
Target Annual I 30% 50% 65% 85%
Bonus
Target Total I £539,500 £740,000 £900,000 £1,090,000
Annual Pay (73%) (60%) (49%)
LTI expected I 30% 60% 75% 85%
value
Target Total £664,000 £1,065,000 £1,310,000 £1,550,000
Direct (62%) (51%) (43%)
Compensation
Nick’s competitive position at Total compensation is substantially behind what
he could secure in the outside market. This is potentially a cautious view, in
any case, since he would have access to the whole market, not just to these
sectors.
Retention Risk
We remain concerned there is a pressing and immediate retention
risk. Nick has indicated that he is receiving approaches from other
organisations, and we believe that we need to take pre-emptive action
to prevent these approaches becoming a serious threat to retention.
This would be far more preferable to us than having to make a counter offer of
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improved remuneration in the event that he receives a concrete offer from
elsewhere.
It is in this context, that I would like to remind you of the competitive
market for talent such as Nick given the breadth and depth of his
knowledge and experience in the Retail market. Whilst we are not
suggesting a base pay adjustment to Nick’s package, given the political
sensitivities surrounding executive pay, it is important to recognise that we do
not operate in a vacuum, and that there is an increasingly active external
market for high quality talent such as Nick.
Suggested Approach
We propose that we deliver retention in three areas to address the medium
and longer term demands that we are placing on Nick Read:
1. Enhance the potential reward under the Transformation Incentive (TI)
by a third - focusing on the key medium term target of a cultural reset.
2. Enhance the potential reward under the 2021/22 STIP by a third to
align with the inquiry timetable
3. Enhance the potential reward under the 2021/24 LTIP by 50% to
reinforce retention to at least 2025
Since joining the Post Office Nick Read has received only £32,000 in variable
pay.
In summary
I look forward to receiving your response to these proposals and hope that we
can reach an agreement on an approach which will ensure that will retain Nick
Read in the business through this critical stage.
Tim Parker
Chairman
Post Office Limited
This table highlights the impact on the TIS, STIP and LTIP.
LTIP 2021-24
Payout Full Full Full Full
CEO Period Salary Measurement Dette Entitlement + Entitlement -I Entitlement + Entitlement
OTE OTE Stretch Stretch
Transformation _ 9 9
Incentive 1/4/20 £415,000 Jan-22 Mar-22 30% of £124,500 45% of £186,750
31/3/21 salary salary
Scheme
CEO
Exceptional TI I 1/4/20 - 2 10% of 15% of
Scheme 31/3/21 £415,000 Jan 22 Mar-22 salary £41,500 salary £62,250
Incentive
. 1/4/21 = . . 30% of 45% of
STIP 2021-22 31/3/22 £415,000 May-22 Aug-22 salary £124,500 salary £186,750
CEO
Exceptional 1/4/21 - . 2 10% of 15% of
STIP 2021-22 31/3/22 £415,000 May-22 Aug-22 salary £41,500 salary £62,250
Incentive
a 1/4/21 - 30% of 43% of
LTIP 2021-24 31/3/24 £415,000 May-24 Aug-24 salary £124,500 salary £178,450
CEO
; 1/4/21 - : : 15% of 21.5% of
Exceptional 31/3/24 £415,000 May-24 Aug-24 salary £62,250 salary £89,225
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