The board of governors also disclosed that it awarded Mr. Potter $135,041 in “pay-for-performance” and incentive payments for his “effective leadership during the difficult economic challenges of 2008.”
Details about Mr. Potter’s compensation, as well as pay packages for other top postal executives, were disclosed in a Dec. 10 filing with the Postal Regulatory Commission by the board of governors. The filing came about six weeks before Mr. Potter told Congress that the Postal Service reported a net loss of $2.8 billion during fiscal 2008.
In his congressional testimony, Mr. Potter said the Postal Service’s financial outlook remains so dire that officials may have to eliminate a day of mail because of declining mail volume. He also said there are plans to reduce staffing at postal headquarters by 15 percent and cut travel budgets, in addition to the salary freeze. Last week, the Postal Service announced it would raise the price of first-class mail stamps to 44 cents, up 2 cents, effective in May.
Mr. Potter also said the losses occurred even as officials cut costs by more than $2 billion, reduced work hours by 50 million compared with the previous year and reached record levels for on-time delivery. He said the problems were caused, in part, by a weakening economy, billions of dollars in required payments to prefund retiree health care benefits and more people using electronic mail to communicate.
Speaking about an executive salary freeze, Mr. Potter told Congress, “Executive leadership in the Postal Service has an obligation to help send a message of change throughout the organization, demonstrating that they, too, have a personal take in working to overcome the challenges we are facing.”
After passage of the Postal Accountability and Enhancement Act of 2006, Mr. Potter’s salary rose more than 35 percent, from $186,600 to $258,840, according to a report last year by the trade publication Linn’s Stamp News, which cited information obtained through a Freedom of Information Act request.
The January 2008 report said the raises, approved in May 2007 and retroactive to Jan. 5, 2007, also included a 26 percent from $186,000 to $235,000.
Mr. McKiernan said the Postal Service is competing against large private delivery companies whose executives earn millions of dollars a year. He also said outsider reviews recommended increasing compensation for top Postal Service executives based on a review of, among other things, how much executives at private delivery companies were earning.
“What members of Congress were looking at was the president of FedEx making $10 million,” Mr. McKiernan said. “Given the responsibility, the feeling was to retain and attract [executives] some modest increase was warranted.”
Charles Guy, an adjunct fellow at the Lexington Institute who has studied postal finances for decades, said of the executive pay freeze, “They’re already getting about all they can get and now that they’re put in a corner; they really had no choice.”
But Mr. McKiernan said the pay raises came at a time when the postal system wasn’t in such a bad financial state. He also said Mr. Potter didn’t ask for the pay raise. Ultimately, he said, Congress authorized and the Postal Service’s board of governors approved the raises.
“We ended the year 2007 in the black,” Mr. McKiernan said. “There has been a feeling in Congress, especially in the committees of jurisdiction, that … senior officials should be compensated as adequately as possible,” he said.
The Postal Service is an independent government agency subject to congressional oversight, but it doesn’t get its funding from taxpayers. It’s also subject to a host of government rules, including mandates that it pay billions of dollars to fund health care benefits for retirees and deliver mail six days per week.
Based on Mr. Potter’s employment agreement, the Postal Service paid him a performance incentive award of $116,741 for fiscal 2008, as well another award of $18,300, according to filings. In a report, the board of governors cited Mr. Potter’s “effective leadership during the difficult economic challenges of 2008.”
The report on executive salaries by Linn’s last year noted that in releasing the base salaries, postal officials noted that the President’s Commission on the U.S. Postal Service in 2003 called for increasing pay for top executives so they’re more competitive with the private sector.