POL00448675
POL00448675
Chairman notes: Request for approval to retain and seek an increase in remuneration for Nick Read CEO Post
Office Ltd
1.Positioning:
(i) You've appointed me as Chair of Post Office to come in, build a business that protects your policy
objectives and which has a sustainable future.
(ii) That having spent considerable time looking at POL over the last few months I can see that we face
unprecedented challenges in terms of the public enquiry, the replacement of the Horizon system, the level
of industrial unrest, and retaining a commercial focus for the business, all of which require strong
leadership and a ‘steadying’ of the ship — this is both a unique and critical time for POL.
(iii) I have got to know Nick, who I view as a hugely talented CEO; he remains very committed to his role and
feels a strong sense of responsibility in seeing POL through this turbulent period and beyond
(iv) In my view (and one that is shared by my predecessor, Tim Parker) Nick has built huge confidence in the
stakeholders, colleague, postmasters, and now is the time to back him and to demonstrate to him that we
place huge value and worth in the role he plays.
(v) That we minimise any risks to our 3-year plan by removing any possible instability caused by disruption if
Nick were to leave and recognise that his exit would cause irreparable damage / damage with a cost far in
excess of what it should cost to retain him.
(vi) As per my letter, I have a deep concern about the external and reputational impact on the Shareholder,
that losing our Chief Executive Officer will have at this time, but particularly on Sir Wyn William’s
confidence that Post Office has the required capability to deliver and sustain changes.
(vii) Fixing the past and taking the situation seriously, addressing compensation issues, fronting at Select
Committees/APPG and providing visible leadership through the Inquiry. Nick’s departure would undermine
the BEIS position. I also believe the credibility and confidence with the wider stakeholder group is what
BEIS will lose/miss going into the Inquiry year.
(viii) Nick also has wider relationships with CWU, Inquiry, Postmasters, as well as suppliers, partners and
customers — this includes banks (Nick knows all the CEO’s, having worked with a number of them. This was
important in Banking Framework negotiations) and the Regulators - the FCA, UK Finance, Ofgem etc.
(ix) The SoS needs to understand this NOT business as usual— the dramatic collapse in trade, Industrial Action,
Public Inquiry, Compensation, migration off Horizon, desperate Postmasters (can the business afford to be
rudderless?).
(x) My strong recommendation is that we should do all we can to retain Nick, to reinforce our support for him
and the value he has within the POL. I would ask you to agree to:
a. To approve the increase in his overall remuneration as recommended and outlined in my letter which
is fully aligned with the principle of the HMG policy - to compare roles against private sector and lower
quartile positions — see comparator table below.
b. That we support Nick in his decision to build a capable leadership team to deliver the much needed
modernisation and sustainable change to the POL (which we need to deal with as a separate point in
the coming weeks)
2.Background:
(i) Nick was appointed in September 2019 on a base salary of £415k. 30% STIP and 30% LTIP.
(ii) He has received no increases since then, yet the market value for CEO’s is increasing as per the data
outlined in the letter.
(iii) Benchmark for the role — extracts are in my letter — show total CEO reward at POL at c40% to 50% off
benchmark. In real terms, this shows Nick is £400k off the lower benchmark group, on total package.
(iv) Nick’s current bonus is frankly intolerable. Background to his bonus;
(v) 19/20 - 50% reduction in STIP because the Remco said the ‘optics’ weren’t good
(vi) 20/21 - 100% removal of STIP AND LTIP
(vii) 21/22 - Bonus paid out — but still awaiting final SoS acceptance of the application to the multiplier to the
full STIP
(viii) 22/23 — currently no bonus scheme in place...9 months into the year. Nothing confirmed covering short,
medium nor long term plans; No reward, no incentive nor retention scheme for the current year frankly,
feels reckless.
Post Office Limited is registered in England and Wales. Registered No.
2154540. Registered Office: Finsbury Dials, 20 Finsbury Street, London
EC2Y 9AQ. postoffice.co.
Post Office and the Post Office logo are registeredtrade marks of Post Office
Limited uk
POL-BSFF-WITN-006-0005386
POL00448675
POL00448675
(ix) Paula Vennell’s last full year in CEO role £717k total reward - £328k fixed and £389k variable — 2018/19.
(x) We have costed that any replacement will be seeking as a minimum a Lower Quartile package in excess of
£1m (and recruitment fees of c£150k)
(xi) I know my predecessor Tim Parker, raised the specific issue of Nick Read’s remuneration with both Paul
Scully and with Kwasi Kwarteng over the past year. On both occasions the ministers declined to approve
any improvement in Nick’s package, citing concerns over the Inquiry and the context of the public sector
pay freeze. They indicated that the situation be reviewed again in September 2022 once the Inquiry was
concluded (which has now been extended and potential it may not conclude until at least 2024/25). So!
believe we need to respond now to the very real risk.
3. Risks — Funding (3 year) and Costs: (i
Nick is very well respected and recognised by everyone at BEIS and UKGI, across all activities. Most recently he is
actively engaged in reviewing and updating the future funding and strategy for the Post Office.
(i) since I’ve arrived it is clear Post Office is facing unprecedented challenges and headwinds like I’ve not seen
anywhere else before, and without reinforcing our support and recognition for Nick, this raises very
significant risks and consequences for the business and the Shareholder;
(ii) there will be no easy choices only trade-offs to resolve these challenges; and I need you to understand
this, be willing / ready to step in with support and we need to agree to keep talking on how we navigate
through the next 18 months.
(iii) Specifically in relation to our spending review settlement in March, in September POL has reforecast its
3YP projections which has identified deterioration in cash headroom mainly due to trading
challenges, inflationary pressures and unplanned increases in legal and technology costs .
(xi) Since then, management have been working hard to close the gap and significant progress has been made
however new challenges outside POL’s control have emerged. This includes further weakness in mails,
slippage of the Inquiry timeline and increase NBIT costs.
(xii) We do not know what these mean for our forecasts today, but we do know is that we will need additional
support from BEIS. _ .
(xiii) We have intimated already that we will need a minimum of § IRRELEVANT: to address short term difficulties
and we think this remains the case and we are engaging with the PermSec on the detail of this.
(xiv) This ongoing dialogue and trust between BEIS/UKGI and Nick is pivotal to ensuring the sustainability of the
POL. Nick’s relationships will enable a continued level of trust and confidence in addressing these
significant funding challenges.
4. Risks — Public Inquiry Impact, Reputation, Confidence & Leadership Instability
(i) With specific reference to the Inquiry, Nick has been exemplary in his navigation through the sensitivities
and demands of the process; he strongly guards the reputation of both the PO and the Government.
(ii) If we lose Nick, I anticipate that questions will rightfully be raised as to why this risk was not anticipated
and addressed. Furthermore, it could be taken as an indication of a lack of serious commitment to acting
‘on the findings of the original Judgements and the Inquiry.
(iii) The current lack of any suitable internal replacement (though this is something which will be a priority in
the coming period).
(iv) The value of Nick’s leadership which brings much needed stability to Post Office at the current time
(v) The strong relationship he has built with UKGI and BEIS and funding security (as above).
(vi) His strong executive, commercial and retail skills — heightened by the flight risk (retirement) of other
Executive talent (e.g., Owen Woodley, Chief Commercial Officer, intended retirement in 2023).
Summary recommendation:
I, and the rest of the Remuneration Committee at POL, believe we need to take control of this situation which has
posed a long-standing risk and is genuinely at risk of materialising at any time.
© We see Nick’s case as a unique case at a critical time for the Post Office.
Post Office Limited is registered in England and Wales. Registered No.
2154540. Registered Office: Finsbury Dials, 20 Finsbury Street, London
EC2Y 9AQ. postoffice.co.
Post Office and the Post Office logo are registeredtrade marks of Post Office
Limited uk
POL-BSFF-WITN-006-0005386
POL00448675
POL00448675
¢ The profile of the PO Executive team now includes several recent recruits or promotes, where the
package has been set at an appropriate market level, we need to do the same for the CEO.
© We must recognise that, if Nick were to resign, any replacement will be seeking as a minimum a Lower
Quartile package in excess of £1m to substantial exposure and scrutiny of the role as well as the
ongoing challenges associated with the Inquiry adequately compensate for this position.
¢ If this were to be approved, I would seek to a) fix the remuneration at this level for the next 2 years and
b) introduce a retention mechanism which Nick will need to sign up for at least 2 years.
Back-up information:
Current Package and Remuneration History:
Salary & Incentives On Target Maximum
Compensation Compensation
Base salary including benefits £415,000*
Annual incentive (30% target, 45% £124,500 £186,750
maximum)
Long-term incentive (30% target, 45% £124,500 £186,750
maximum)
Total on-target compensation £664,000 £788,500
*Note that the base salary level also includes provision for benefits (e.g., pensions, healthcare and car benefits
which were integrated into base salary on date of joining) — if we exclude benefits, Nick’s base salary is actually
c.£330,000. Since his appointment in September 2019, Nick has not had any base pay increase(s).
Benchmark Data:
e Advice from compensation advisors, Willis Towers Watson (and our Remuneration Committee Advisers)
From the benchmark data /evidence we have gathered we applied the principle of the HMG policy - to
compare roles against private sector and lower quartile positions. This shows Nick’s current package falls
short of lower quartile market level (overall by £400k shown in table) in
The comparator group (Table 1) comprised of mails & retail, social purpose organisations and challenger
banks/mutuals, reference data is relevant to 2021 and is under review in 2022 - initial data indicates that base
salary levels are not substantially changed but that incentive opportunities for both annual and long-term
incentives have increased significantly:
Table 1 — shows the detail on the comparator group
Post Office Limited is registered in England and Wales. Registered No.
2154540, Registered Office: Finsbury Dials, 20 Finsbury street, London
EC2Y 9AQ. postoffice.co.
Post Office and the Post Office logo are registeredtrade marks of Post Office
Limited uk
POL-BSFF-WITN-006-0005386
POL00448675
POL00448675
Market assessments — Publicly funded organisations
Group Chief Executive Officer
D3 70%
108 - Na
. Wa wa
108 me Na
a0 cry Na
00 2 25%
id ory Na
os on nwa
ame ory a
ue no ory
The Royal Mit Lmtd Cet Exmcutve ‘Ae emn066 sr ™ 20%
i GRO,
Lowa quate 410 ‘330000 a
Moses 10 420.000 oem ras = rion
Upper uate er) ‘40.000 - 96.000 = 595.00
Orcnance Survey Lented’s term Cie! Executive OMce” was. in October 2021, Steve Baw ne farce year was
Witwn te cee" group set aut above neve mare! Pend person C "2 NDA for example are eigiie fr ‘ofthe cw service scheme (CEO cash 9
eu), wha, af BBC receive ro pension i CTAIAA apes 1! FCA. Channa 4 and HS? fr exams espe fr defined conmbuton
ercash nto.
Taam ener een te nrn ten wtw
Summarised benchmark data and Nick’s current package & proposed package (for info):
Lower Median Upper
Quartile Quartile
Base Salary £465,000* £545,000* £625,000*
Total Cash (Salary I £740,000 I £900,000 I £1,090,000
plus annual bonus)
Total on target £1,065,000 I £1,300,000 £1,550,000
Compensation
(Total cash plus
long-term
incentives)
Annual incentive 50% 65% 85%
target opportunity
Long-term 60% 75% 85%
incentive: annual
target opportunity
*Benchmark base salary data excludes benefits
** Nick Read’s base salary includes an allowance for benefits. Salary without benefits is c£330,000
Total recommended package increases — 4 elements:
1. Base salary increase — aligned to lower quartile £465,000 (as per the HMG policy).
Post Office Limited is registered in England and Wales. Registered No.
2154540. Registered Office: Finsbury Dials, 20 Finsbury Street, London
EC2Y 9AQ.
” postoffice.co.
Post Office and the Post Office logo are registeredtrade marks of Post Office
Limited, uk
POL-BSFF-WITN-006-0005386
POL00448675
POL00448675
2. Aprovision for benefits total of £70,800. Nick’s provision for benefits currently stands at c£85k as it
includes a 25% pension contribution, which is out of line with the ‘all employee pension contribution which
stands a ;
Our proposal is to reduce and align his pension contribution to ‘IThe provision also includes no further
increase in his car and healthcare allowance £10,000 and £5,000 respectively, as included in the original
‘provision for benefits’ in his offer of employment.
3. To increase the % opportunity for:
. the annual incentive to the lower quartile benchmark of 50% at target amended for 22/23
. long-term incentive to 60% at target, amended for the 2022/25 LTIP.
4. To increase the maximum pay-out opportunity for the annual incentive to 90% of target and to 100% for
the long-term incentive plan since current market movements indicate that maximum bonus levels are far
in excess of the current POL offer.
Nicks Bonus Position (for information)
The reference to point re the SoS’ acceptance on STIP for 2021/22 is due to the application of the personal
multiplier to the whole of Nick’s bonus for 2021/22. Key extract from the plan design for 2021/22:
There are Company measures in the plan which account for 80% of the plan payment
and comprise both financial and Postmaster-centric measures. The remaining 20% is
on personal performance in line with the rating received through the Performance
Management process.
The application of the multiplier to the whole of the bonus has been the basis of the challenge, as the
interpretation is a grey area. Whilst approved by the RemCo before payment in August 2022 this resulted in UKGI
flagging the issue to BEIS — and correspondence has exchanged between RemCo and the RemCo Chair has engaged
directly with BEIS. The amount in question is £30k. We have yet to have this approved, though we understand it
will be. Going forward, we will be defining clearly the rules of the scheme and tightening areas of discretion.
Post Office Limited is regi
2154540. Registered Offi
fered in England and Wales. Registered No.
Finsbury Dials, 20 Finsbury Street, London
EC2Y 9AQ. postoffice.co.
Post Office and the Post Office logo are registeredtrade marks of Post Office
Limited uk
POL-BSFF-WITN-006-0005386