Moya Greene will repay £250,000 (about $400,000) given by the Royal Mail to help its Canadian chief executive buy a home in the U.K. after an intervention by Vince Cable, the business secretary.
Mr. Cable intervened on the basis that the state-owned company, which will be privatized later this year, had not sought approval for the "material" payment, which was outside Ms. Greene's pay agreement.
The payment was approved by the group's independent remuneration committee of non-executive directors and had not been asked for by Ms. Greene, according to a spokeswoman for the Royal Mail.
It took the executive's total package to £1.47-million ($2.34-million), up from £1.1-million in the previous year, with her basic pay at £498,000. According to The Independent, Ms. Greene also received a short-term financial incentive, cash in lieu of a pension, as well as benefits such as medical insurance and return flights to her native Canada.
The company had justified the extra housing payment on the basis of Britain's more expensive property market than Canada, from where the executive had relocated three years ago.
She is not the first incoming Canadian executive to receive generous payments in relation to housing in London.
Mark Carney, the new governor of the Bank of England, was only recruited by government after he was offered a salary of £480,000 – compared with his predecessor's £305,000 – as well as relocation and housing expenses. Mr. Carney is being paid an annual £250,000 allowance for his housing.
Royal Mail refused to say when Ms. Greene had bought a house or even whether the purchase was made in the last financial year.
However it is understood that she rented a property when she first took up the job in 2010, only deciding later to buy a home. The extra payment was agreed by the company in October 2011 with the house purchase completed in April 2012.
The news comes at a sensitive time given the austerity faced by millions of other workers across the public sector, who will receive a pay rise of only 1 per cent this year.
Mr. Cable told Royal Mail that he would not have approved the payment if he had been aware of it. "I am pleased that this unapproved payment is being returned," he said. "The company acted quickly to rectify the situation." Donald Brydon, chairman of Royal Mail, had apologized for the payment, the Lib Dem cabinet minister said.
According to the group's annual accounts, published on Friday, Ms. Greene received £127,000 of contractual payments towards her relocation, financial advice and flights.
However it explained a further £250,000 payment, saying: "Fees or charges associated with relocation at the company's request are subject to payment by the company to assist any executive."
Ms. Greene is repaying the net sum of £120,000 which was received after tax. She will also have to return a proportion of any capital gains made on the property amid a boom in house prices in Southeast England.
Ms. Greene, former head of Canada Post, became chief executive of Royal Mail three years ago – replacing Adam Crozier – and is in charge of the company at a critical time.
The company, which has £9-billion of revenue and 150,000 staff, will be floated on the London Stock Exchange in the coming months. As head of the group, Ms. Greene has sped up modernization, for example by cutting the number of mail centres.
A spokesman said the group had been "transformed" under her leadership and acknowledged that remuneration was a sensitive topic in the current economic environment.
"In 2010-11 Royal Mail was balance sheet insolvent with negative cash flows. The company also had going concern issues," he said. "For 2012-13, the group reported positive free cash flow of £334-million. There were no going concern issues."
The group's business had lost £120-million in 2010-11 but produced a £331-million profit in 2012-13, it added.