Treasury and Exchequer 
Ministerial Decision Report
JERSEY POST LIMITEd – INCREASE IN ANNUAL REMUNERATION OF NoN-EXECUTIVE DIRECTORS
- Purpose of Report
To enable the Assistant Minister for Treasury and Resources, to consider and, if thought fit, approve an increase in the annual remuneration for Non-Executive Directors (“NED”) of Jersey Post.
- Background
A request has been received from the Chief Executive of Jersey Post seeking the approval of the Assistant Minister for Treasury and Resources to an increase in NED fees as at 1 January 2020 . Ministerial approval is required, as per the terms of the Memorandum of Understanding (“MOU”). Jersey Post last increased their NED remuneration in 2011.
- Request
The Chief Executive in a letter dated 4 October 2019 has proposed an increase of £5,000 per annum in remuneration for each Non-Executive Board Member, excluding the Chair, for whom no increase is proposed, effective from 1 January 2020. The Board currently consists of 1 Committee Chair, 1 Senior Independent Director (“SID”) and 3 other NEDs, with recruitment currently ongoing for another NED. This request is outlined in the table below that has been provided by the Chief Executive and illustrates the proposed increase in remuneration compared to other arms-length organisations.
- Approximate values based on annual accounts
- Comment
Jersey Post have not increased NED remuneration since 2011 and the current remuneration of Jersey Post’s NEDs is at the lower end of the average NED remuneration scales for the arms-length organisations as shown in the C&AG’s recent report on Board Remuneration.
The proposal made by the Chief Executive is generally in line with inflation since the last increase in 2011. The inflation percentage change from December 2010 to September 2019 was 25.5%. This is documented in the table below.
The table above shows that the proposed remuneration is, on average, in line with inflation linked remuneration increase for the SID and Committee Chair roles. The proposed increase in the standard NED fee is above inflation, showing a 33.3% increase. This proposed above inflation increase has been made following Jersey Post’s recent recruitment and selection process for NEDs and market feedback received at the time of the recruitment process.
It was suggested by the recruitment consultants that the current remuneration for the roles when compared to the expected time commitments and the current market place remuneration is too low to attract the right candidates for these roles. This increase seeks to address this feedback. There are 5 NEDs who will receive this increase. Jersey Post are in the process of recruiting a further NED to a vacant post.
Jersey Post have provided a breakdown of the expected minimum time commitments of NEDs per calendar year. The current NED contract at Jersey Post requires a contractual minimum commitment of 10 days per calendar year attendance at Board and Committee Meetings, this is stated in the below extract:
3.1 The Director’s time commitment is estimated to be ten days per annum for attending Board and Committee meetings. This commitment is exclusive of preparation time and the total time commitment, including preparation for all meetings, is anticipated not to exceed 20 days per annum in aggregate. The Director will be required to attend Board meetings of the Company and the Annual General Meeting. The Board meets a minimum of four times each year and the meetings are normally held at Postal Headquarters, Rue des Pres Trading Estate, St. Saviour, Jersey, Channel Islands.
The Chief Executive has provided the table below which sets out the estimated time commitment expectations of their NEDs per calendar year. This is significantly above the minimum contractual obligation of the NEDs.
In addition to the above approximate time commitment per annum Jersey Post NEDs are also expected to attend around 7 – 8 conference calls per year lasting on average of 2 hours per call.
Flexibility over additional attendance is also considered as a key part of the role of a NED at Jersey Post. Due to Jersey Post’s increasing investment in international ventures there is an increased likelihood that Jersey Posts NEDs will be required to travel globally to attend meetings.
Jersey Post already publish their NED remuneration publicly in their “Business Review for the year” as per the C&AG Report recommendations. They have also complied with the requirements under the MOU and have sought advance approval of the increase in the remuneration of NEDs.
Jersey Post is a different business today than it was at the time these fees were last reviewed and the time commitment required from NEDs is significantly greater. The company has expanded its investment and operations significantly in recent years to offset the rapid decline in the traditional on-island postal business. This creates greater challenge for the Board and its governance role. It is essential therefore that it can recruit appropriate NEDs with the skills and experience.
Having considered the information that has been provided by Jersey Post, the information contained in the recent C&AG Report and the need for Jersey Post to recruit and retain experienced and skilled NEDs given to the complexity of the business the proposal put forward for approval is considered reasonable.
- Recommendation
The Minister for Treasury and Resources is recommended to:-
- Approve the proposed increase in remuneration as requested from 1st January 2020.
- Request Jersey Post to review NED fees on a more regular basis with a clear link to Jersey RPI for future uplifts, as is the case with this proposal.
- Reason for Decision
To fulfil the requirements of Section 17.2 of the Memorandum of Understanding which requires any changes in the level of remuneration paid to non-executive directors to be agreed in advance by the Minister.
The request for an increase in NED remuneration is reasonable based on an assessment of the proposal and that this is the first increase in NED fees since 2011.
- Resource Implications
There are no additional resource implications for the Government as a result of this decision. All costs are borne by Jersey Post. The proposal increases the collective remuneration paid to NEDs from 2020 by £25,000 per annum i.e a £5,000 increase for five NEDs excluding the chairman. This brings the total remuneration costs of NEDs up to £150,000 per annum for Jersey Post based on a board of six.
Report author : Advisor – Shareholder Relations | Document date : 4th December 2019 |
Quality Assurance / Review : Head of Shareholder Relations/ Head of Financial Governance | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2019-0115 - Jersey Post NED remuneration approval |
MD sponsor : Director of Treasury and Investment Management |
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