Examination of Witnesses (Questions 20-39)
ROYAL MAIL
GROUP PLC
18 JULY 2006
Q20 Mr Bone: Would you? Is there
anything I have missed? Is there any other financing method you
could use to do this investment?
Mr Crozier: No. We are not allowed,
without the express permission of the shareholder, to go outside
for any funding.
Chairman: We will move on to the ownership
questions, if we may. Rob Marris.
Q21 Rob Marris: My colleague, Brian
Binley, is going to ask you something about the incentive side
of things, but I wanted to ask you some quick questions, some
of them may require yes or no answers. Have you formally or informally
approached the Government with a share-ownership scheme to widen
share ownership for the Royal Mail?
Mr Crozier: Formally.
Q22 Rob Marris: You have formally
done so?
Mr Crozier: Absolutely, and have
done a few months ago, yes.
Q23 Rob Marris: Could you outline
the details of that formal programme, that is the package you
put to the Government?
Mr Crozier: Again, to go back
to Allan's point, it is very much part of the investment case
as a whole, so it does not live out there to the side, it is part
of the overall case. We recognise that the company is going to
go through some fairly huge changes over the next few years and
it is very important that as part of that we take our people with
us and we motivate them to want to do a good job for us and for
the customers. What we envisage is having assigned over to the
company 20% of the shares of the organisation. Those would be
allocated to people absolutely equally. Whether it is myself or
Allan or frontline postmen and women, everyone would get exactly
the same.
Q24 Rob Marris: To employees?
Mr Crozier: To employees. Those
shares would have very small initial value, but as the company
grows and achieves its target those shares would grow to hopefully
provide people with around £5,000 each of equity value in
the Royal Mail.
Q25 Rob Marris: How will this raise
any money for the company? I can see that selling shares would
raise money on the stock market, but how?
Mr Leighton: It does not.
Q26 Rob Marris: So why is it part
of the overall finance package?
Mr Crozier: Because that is what
helps to massively transform the performance of the company, which
generates the profits, which allows you to reinvest in the organisation.
We have got empirical evidence of how this works from all over
the world and in the UK. It is a pretty standard way of doing
it. The shares scheme, the reason it is absolutely fundamentally
not privatisation is the shares can only stay within the company
in a trust that we would set up. If people decided after three
years they want to cash in those shares, they can only sell them
to the company and, if they wanted to, they could buy some extra,
again through the trust. If you leave, either because you get
another job or you are made redundant or you retire, you have
to give the shares back. So the shares always stay within the
Royal Mail itself. They never leave.
Q27 Rob Marris: When was this formally
put to the Government?
Mr Crozier: I cannot remember.
It was a few months ago. Again, I can get you the exact date if
you would like, Chairman.
Mr Leighton: So, your point, it
was part of the overall—. It goes back to the same thing.
It is all part of a business case which covers all the aspects
of what should be required to modernise the company.
Q28 Rob Marris: What are the views
of the main trade unions on this. Presumably you consulted them
on the overall financing, including this aspect thereof?
Mr Crozier: We consulted with
our people, and within the space, first of all, of about two weeks
we had 80,000 replies from people saying that they thought this
was a good idea.
Q29 Rob Marris: You talk about "our
people", that means your staff directly?
Mr Crozier: That is right, yes.
Q30 Rob Marris: What about consulting
with the trade unions, which is what I was asking?
Mr Crozier: We understand from
the trade unions that they are against it. We understand from
our people that they are for it.
Q31 Rob Marris: So do I, but did
you consult the trade unions on this?
Mr Crozier: We have certainly
spoken to the trade unions on a number of occasions, myself and
Allan with Billy and Dave. I know the Government have spoken to
the trade unions, initially through Alan Johnson when he was Secretary
of State. We understand that philosophically they are opposed
to it. We take a different view and we believe our people take
a different view, and, in the end, our job is to do what is right
for the business and right for our people, because there is a
huge transformation that needs to take place.
Q32 Rob Marris: When you say you
consulted "our people", you did a survey or you wrote
to them?
Mr Crozier: We wrote to all of
our people asking them to let us know whether they were interested
in this, starting with whether they thought it was a good idea,
and we received, I think, 85,000 replies in the space of two weeks
saying, "Yes."
Q33 Rob Marris: And to a total staff
complement of?
Mr Crozier: Of around about 150,000,
but then again on most of our ballots that would be an enormous
response. We very rarely get a response like that.[1]
Q34 Rob Marris: What part of your Memorandum
and Articles of Association permit you to spend Post Office resources
in that way?
Mr Leighton: In what way?
Q35 Rob Marris: In terms of sending
out letters to staff and surveying them on share ownership and
that kind of thing?
Mr Leighton: As far as I am concerned,
the ability of the management to talk to their people and consult
their people at any time is absolutely open to anybody in the
organisation, and we do not consult a Memorandum or Articles of
Association, we are a plc, we are a commercial entity, we engage
with our people, we are interested in what our people think and
that is why we do it.
Mr Crozier: I cannot think of
another company that does not talk to its own people.
Q36 Rob Marris: I am asking just
a simple question. Which part of your Memorandum or Articles of
Association enables you to do that. I am not suggesting that it
does not; I am simply asking which part of it allows you so to
do.
Mr Crozier: None. Management has
the ability to talk to its people at any time, full stop.
Q37 Rob Marris: About anything?
Mr Crozier: About anything.
Q38 Rob Marris: About what colour
car they might like?
Mr Crozier: Absolutely.
Mr Leighton: Whatever you want
to do.
Q39 Rob Marris: Could you send us
a copy of the relevant part of the Memorandum or Articles of Association?
Mr Leighton: If there is one,
we will send it to you with pleasure; if there is not one, there
is not one.
1 In total Royal Mail Group wrote to 208,000 employees
and 91,703 returns were received. Back
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