Government's Shareholder Responsibilities as regards Royal Mail Holdings plc
Nature of Shareholding
The Government owns a 100% shareholding in Royal Mail Holdings plc. The HM
Treasury Solicitor holds one ordinary share (as a nominee of HM Treasury) and
the Secretary of State for Trade and Industry holds 49,999 ordinary shares plus
one special share. HM Treasury hold a share because company law requires a plc
to have a minimum of two shareholders.
Management of Shareholding
The day-to-day management of this shareholding is overseen by the Royal Mail and
Postal Services Team, which is part of the Shareholder Executive Unit within the
DTI. The Shareholder Executive was created in September 2003 with the
overarching objective to make Government an effective and intelligent
shareholder. The Executive draws on the skills of both the private and public
sectors to meet its objectives, and its portfolio currently extends to 25
businesses, with a combined turnover of around £20 billion.
Tell me more about
® The Shareholder Executive - http://www.shareholderexecutive.gov.uk
Related Publication
® The Shareholder
Executive -
Annual Report 2004/05
[3,488
Kb]
Overall Aims for Royal Mail Shareholding:
-
to maximise the shareholder value of Royal Mail within the current framework of Government policy (i.e. take full account of Government policy, which of course includes non commercial objectives, but within this context seeks to use its discretion to act as a commercial shareholder);
-
for Royal Mail to be a best-in-class, publicly owned postal service provider with robust, long-term, sustainable business health;
-
to ensure the effective delivery of Government and other services through an efficient and fit for purpose Post Office branch network, which offers maximum access to those who need it.
Overall Aims for Shareholder
Relationship
The Government and Royal Mail share common objectives of having a working
relationship in which:
-
the roles of each party are clearly defined;
-
each party recognises and respects those rules;
-
dialogue and interactions are professional, efficient and based on trust.
Government as Shareholder
Unlike a normal listed company, Royal Mail Holdings plc does not have a quoted
share price nor is it subject rigorous external finance analysis (i.e. the means
by which a shareholder would normally assess a company's performance). In the
absence of these mechanisms the Memorandum and Articles of Association of Royal
Mail Holdings plc provide for the basic relationship between the shareholder and
the company.
The Articles, in combination with Company Law, define the formal statutory
relationship between the shareholder and the company. They give the Secretary of
State (as special shareholder) certain rights and set out that the
shareholder/company relationship works on these principles:
-
the shareholder appoints the Board and agrees the terms on which Directors are appointed and incentivised (annually and for the longer-term);
-
the shareholder agrees the company's strategic plan with the Board (the plan is a commercially confidential document and is not released in the public domain, but the Government will announce each time it has approved the plan and set the profit target);
-
the Board is accountable to the shareholder for delivering the agreed plan;
-
the shareholder gives the Board freedom to take action necessary to deliver the plan;
-
the shareholder monitors the company's performance to satisfy itself that the plan is on track;
-
the shareholder approves the disposal of significant assets of the company;
-
the shareholder approves borrowing by the company that is in excess of certain thresholds (essentially anything over £75 million).
Tell me more about
® Royal Mail's key responsibilities within the
current framework for UK postal services.