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BEISO001116
Department for
Business, Energy
UK Government & Industrial Strategy
Date: 24 January 2018
Director General: Mark Russell
Lead Officiak Richard Callard / Nick Parker
Lead Official Telephone:
Recipient To Note / Comment To Approve / Decide
Secretary of State x
Permanent Secretary X
Special Advisers x
Post Office, Appointment of Non-Executive Directors
Summary
1) There are two proposed changes to the non-executive director (NED) roles on Post
Office's Board that require Secretary of State approval:
e Independent NED Virginia Holmes will be stepping down from the Board asthe
end of her second three-year term expires April 2018. POL is seeking a
replacement. Independent NED roles are delegated to the Nominations
Committee of POL (only the Chair is a ministerial appointment), butministerial
and CST approval is required for the salary of NEDs
e Shareholder Representative NED Richard Callardwill be stepping down from
the Board in March. UKGI proposes to replace him with a new UKGI Director
Tom Cooper. This role is unremunerated, but requires Secretary of State
consent as Special Shareholder.
Timing
2) POL is keen to issue its advert for a replacement NED within the next 10 daysto
ensure a replacement for Virginia Holmes can be found in time
Recommendations
3) That you write to the CST setting out your approval of the proposed salary for
POL’s replacement NED. A draft letter for you to sign and send to the CST has
been included at Annex A. Annex B includes the necessary pro-forma that should
be sent along with your letter to the CST.
4) That you approve the appointment of Tom Cooper.
Advice
5) The POL Board currently consists of the Chair, a Snior Independent Director,
three independent NEDs, the shareholderrepresentative NED appointed by BEIS,
and the Chief Executive Officer andChief Financial and Operations Officer
6) POL operates in highly competitive markets and is facing competitive pressuresn
all of its key revenue streams. It is meeting this challenge while delivering an
BEIS0001116
BEISO001116
Department for
Business, Energy
UK Government & Industrial Strategy
ambitious strategy to cut central costs, modernise working practices and grow
revenues, while transforming its branch network through the largest investment
programme in its history. In 2017/18 POL delivered its first profit in 16 years, whilst
maintaining the most stable number of branches in the network for decades.
Growing its digital offering and improving its digital capability, with particular focus
on financial services, is both a defensive strategy (to compete in core markets and
become more relevant) and also an opportunity to grow its revenue based on its
trusted brand.
7) POL is seeking a highly-qualified candidateto replace Virginia Holmes(who was a
financial services specialist) ideally with experience in both digital transformation
and IT and with a financial services background. UKGI considers this specification
to be appropriate and will strengthen the Board.
8) POL's annual salary of £35k for NEDs is below the lower quartile for FTSE250
companies of a similar turnover, where benchmarking by KPMG shows lower
quartile fees of £47k (median £51k). This level of fees has not changed since POL
became an independent company in 2012. The time commitment is approx. 2-3
days per month, including 8 Board meetings per year. Although remuneration
levels have not changed since 2012, this level of remuneration is above the CSB
approval threshold on a pro-rated basis, and requires her consent.
9) Virginia previously received an additional £5k for chairing the pensions committee,
which was wound down last year. Virginias replacement would be eligible for such
an additional fee shouldhe or she be asked to chair a committee (although this is
not currently proposed) The POL Chair, who is also Chair of the Nominations
Committee at POL, would be happy to discuss this appointment
10)The SCS Panel has considered the proposed salary for a replacement NED and
has approved it. Subject to ministerial and CST approval, POL will progress its
process to select a replacement, to be in post by April 2018 on an initial three-year
term. We will inform you of their preferred candidate.
11)Separately, the current Shareholder Representative NED will be stepping down
from the Board after four years. We would recommend replacing him with Tom
Cooper, the new UKGI Director in charge of Post Officeshareholder team in UKGL
Before joining UKGI, Tom was most recently Global Co-Chairman of M&A at
Deutsche Bank where he has spent the last 8 years.Prior to joining Deutsche
Bank, he worked at UBS Investment Bank for 21 years, finishing his time there as
Head of European M&A.
12)Tom’s appointment requires your approval as Special Shareholder of POL, but
does not require CST approval as the role is not remunerated.
Contributors
13)This advice contains financialconsiderations, asconsidered and approved by the
BEIS SCS Recruitment Panel.
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Ess
Bod Department for
Business, Energy
UK Government & Industrial Strategy
Investments
14)This advice is not considered to raise legal issues and Legal has not been
consulted.
15)Duncan Moss in BEIS Commshas reviewed this submission, without comment
16)This advice does not have parliamentary handling implications
Annexes
A. Draft letter from SoS to CST.
B. Proforma to be sent to the CST with the letter at Annex A.