Are Royal Mail shares set for a boost amid £1.4 million bonus freeze?

The Royal Mail share price may be set for a boost following news that it won’t pay out £1.4 million in bonuses. Royal Mail shares have been bullish since December, but a Christmas delivery fiasco means executives will miss out.

  • Royal Mail shares down as of 28 June.
  • Positive news overall as shares up 70% since December.
  • Will executive bonus freeze help Royal Mail shares get back on track?
  • Ready to trade the Royal Mail share price? Open an account today

Shares in Royal Mail have increased by 70% since December. However, the seasonal period saw the delivery company battle against staff shortages and Covid-19 restrictions. Images of mail bags piled up were a PR disaster for Royal Mail as the Communication Workers Union (CWU) said its members faced ‘unprecedented workloads’. As a result, the firm has decided not to pay out planned bonuses to the executive team.

What impact did the seasonal fiasco have on Royal Mail?

The delayed deliveries threatened to derail the Royal Mail share price recovery. Indeed, following months of stagnation, the current positive momentum started in early November. Things have been largely positive ever since, with Royal Mail shares opening at £5.80 on 28 June. That’s down 4.2% from June’s peak price of £6.06. Moreover, with the value of Royal Mail shares dropping to £5.75 in the day’s early trading, it is edging towards a new monthly low.

However, the latest Royal Mail share price is still markedly better than it was in December. Additionally, a spokeswoman for Royal Mail said that former interim chief executive Stuart Simpson wouldn’t receive bonuses worth just over £1 million. Former interim finance chief turned chief financial officer Mick Jeavons will also miss out on over £300,000 in bonuses.

The Royal Mail spokeswoman said: ‘We paid no 2020-21 annual bonuses to Royal Mail executive board members and other senior managers. The decision not to award bonuses took several factors into account, including the pace of transformation at Royal Mail being slower than planned and quality of service’.

What factors will help Royal Mail shares?

Andrew Speke of the High Pay Centre said the decision to scrap bonuses should be ‘welcomed’ and shows Royal Mail isn’t just thinking about profits. While executives will be missing out, frontline workers will share a £25 million one-off payment in recognition of their service throughout the pandemic. In tandem, these gestures could help the Royal Mail share price continue its upward trajectory.

Indeed, the company announced in March that profit quadrupled during the pandemic. Although delays created a short-term dip, increased deliveries, coupled with a surge in online activity during the UK’s various lockdowns, took Royal Mail’s annual profit to £702 million. This underlying strength, coupled with an ongoing modernization process and the move to stop executive bonuses may help Royal Mail shares edge closer to the £6 marker in the coming weeks.

Will bonus freeze help Royal Mail shares continue bull run?

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