Ousted Royal Mail chief collects £650,000 pay-off

The Royal Mail executive who was in charge of its letters division last year when the organisation ran into a storm over lost and stolen post, quit yesterday with a pay-off worth up to £650,000.

Elmar Toime, the executive deputy chairman of Royal Mail, is leaving to "pursue opportunities as a consultant to the international postal sector", a company statement said.

Mr Toime, a New Zealander who joined Royal Mail in 2003 after running the postal service in his native country for the previous 10 years, has been progressively marginalised over the last six months. In May he was stripped of responsibility for the letters business after Royal Mail's chief executive Adam Crozier decided to take direct control and then last month he was replaced as chairman of Royal Mail's management committee, again by Mr Crozier.

Mr Toime was relieved of his responsibility for the letters division after the consumer body Postwatch disclosed that up to 16 million letters were going missing and a Channel 4 documentary aired allegations of theft by postal workers.

Observers said that Mr Toime, whose responsibilities since May have been limited to the parcels business, had been living on "borrowed time" and had, in effect, been ousted.

He was paid £650,000 last year and is on a one-year contract which will be honoured. His pay last year was made up of £500,000 in base salary and a £150,000 bonus, representing half the amount he was entitled to. In common with other Royal Mail executives, Mr Toime agreed to defer half of his bonus to this year in light of the organisation's failure to hit any of its 15 performance targets. These deferred bonuses will be paid this year, provided Royal Mail achieves four of the 15 targets in the final quarter, which runs from January to March.

Mr Crozier will take over Mr Toime's responsibility for Parcelforce, and his former position as deputy chairman will not be filled. It was a position created by Royal Mail's chairman Allan Leighton, to ensure there was hands-on experience of running a postal service at the top of the organisation since neither he nor Mr Crozier had any background in the industry.

The boardroom shake-up also saw the appointment of a new non-executive director. Baroness Margaret Prosser, the former deputy general secretary of the Transport & General Workers' Union, is joining the board, bringing the number of non-executives to seven.

Royal Mail is on course to achieve its three-year turnaround which involves achieving a £400m operating profit by 2005. Performance standards continue to lag with all targets missed again in the first quarter of the current financial year. However the organisation said yesterday that it had improved since May and had made "real and substantial gains" in the reliability of its first and second-class letter services.