By Mark Kleinman, City Editor
Royal Mail has averted the prospect of an embarrassing row with its biggest shareholder after a last-gasp decision by the Government to support its pay policies at this week's annual meeting.
Sky News has learnt that Whitehall officials were in talks with the postal operator on Wednesday morning about their concerns over some aspects of Royal Mail's remuneration policy.
Both the company and the Government refused to be drawn on the details of the impasse, but senior sources said that the Department for Business, Innovation and Skills (BIS) had decided less than 24 hours before Thursday's AGM to vote in favour of the binding resolution.
The fact that ministers had yet to take a decision about whether to support Royal Mail's pay policy so close to the shareholder vote suggests a degree of conflict that was not anticipated by the City.
Taxpayers continue to own 30% of Royal Mail, giving Vince Cable, the Business Secretary, a powerful say in the company's boardroom.
Mr Cable had signalled in March that the Government would be prepared to vote against the company if it handed Moya Greene, its chief executive, and other senior managers a pay rise in excess of the 3% awarded to the rest of Royal Mail's workforce.
However, the subsequent announcement by Royal Mail that Ms Greene would not receive a pay increase during the current financial year was expected to have defused the potential row.
"The Remuneration Committee of Royal Mail Group has decided not to propose any base pay increase or new incentive arrangements for the Chief Executive Officer," it said in May.
"In doing so, the Committee has taken into account the views and wishes of the CEO."
Taxpayers own 30% of Royal Mail Some directors of Royal Mail believe Ms Greene is significantly underpaid as the boss of what is now a FTSE-100 company, and were irritated by what they perceived to be grandstanding by the Government.
Even an abstention on the binding pay vote would have been awkward for directors given that City advisory bodies such as PIRC have recommended not supporting Royal Mail's remuneration policy.
A public statement about the Government's voting intentions could be made in the next 36 hours, one insider said.
It is also understood to be supporting all other resolutions at Thursday's AGM, including last year's directors' remuneration report.
The vote on future pay policy is now a binding one thanks to reforms introduced by Mr Cable to make companies more accountable to their owners.
News of the talks comes the day after Royal Mail's shares slipped to their lowest level since last autumn's privatisation, amid concerns about the growing threat of competition in the key UK parcels delivery market.
A critical report published by MPs earlier this month accused ministers of short-changing taxpayers by £1bn by under-pricing the shares.
The Government sold 60% of Royal Mail to outside investors last October, including a significant chunk to more than a dozen so-called priority investors who were earmarked as long-term shareholders.
The decision by some of them to sell almost immediately sparked a political firestorm, with last week's decision by Mr Cable to launch a review of Government asset share sales interpreted as a tacit admission that Royal Mail's flotation had been imperfectly handled.
Royal Mail and BIS declined to comment.
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