- The Washington Times - Wednesday, November 24, 2010

Outgoing U.S. Postmaster John E. Potter, who earned nearly a quarter-million dollars in incentive pay in 2010 on top of a $273,000 salary, is telling fellow Postal Service executives that from now on bonuses and salary increases will be tied to the agency’s financial condition.

Mr. Potter said in a memo obtained by The Washington Times that for fiscal 2011, the Postal Service’s board of governors decided that “all future officer executive pay and incentives will be linked to the Postal Service’s financial condition.”

“We did not come to these decisions easily,” Mr. Potter wrote. “We have sought to strike a balance between alleviating our financial pressures and ensuring the Postal Service remains a great place to have a career.”

The Postal Service recently announced $8.5 billion in losses for 2010. Nonetheless, it paid Mr. Potter $228,088 in extra incentive pay this year and more than $150,000 in incentive pay combined to four other high-ranking executives, records show.

The policy of linking incentive pay to the Postal Service’s financial conditions was implemented amid a string of multibillion-dollar losses for the nation’s mail service.

The Postal Service reported $3.7 billion in net losses for 2009 and $2.8 billion in 2008. Officials blame declining mail volume and the cost of pre-funding retiree health care benefits as mandated by Congress.

“There has been ongoing discussion with our board of governors and senior management regarding executive compensation and benefits related to the financial condition of the Postal Service,” postal spokesman Gerald J. McKiernan said when asked about the pay policy referenced in Mr. Potter’s memo.

“Executive pay and incentives are linked to the overall performance of the organization, including financial performance,” he said.

It’s unclear whether the pay policy will affect top executives who already have employment contracts that include incentive payments.

In one recently approved contract with Paul Vogel, the $245,000-per-year president of shipping and mailing services, a provision states that he’ll receive, at minimum, a performance incentive of 25 percent of his basic salary at the end of each year.

As the Postal Service’s money troubles worsen, watchdog groups and some members of Congress over the past year have questioned the incentive compensation with the financial losses so steep.

At a March 2009 congressional hearing, for instance, Rep. Stephen F. Lynch, Massachusetts Democrat, questioned the decision to award Mr. Potter a $135,000 incentive bonus for 2008 when officials were considering cutting a day of mail delivery and raising stamp prices.

Supporters point out that postal executives earn far less than their counterparts in the private sector and say it´s important to offer top postal officials competitive compensation to retain and recruit talented executives.

Citing Mr. Potter’s “extraordinary leadership during the difficult and unprecedented economic challenges of 2010,” the Postal Service board of governors said in a recent regulatory filing that “it was appropriate” to award him $228,000 in incentive money for 2010.

He declined incentive pay for 2009, Mr. McKiernan said.

The governors also cited “the results he achieved in implementing a number of process improvements that maintained service while lowering costs, his significant staff reductions, [and] his development of a comprehensive plan to guide the Postal Service for the next decade.”

The Postal Service said in filings that the postmaster’s compensation still lags behind the pay of chief executives in the private sector. In addition, a recent audit by the Postal Service’s office of inspector general said the agency was permitted to offer additional benefits beyond money paid out in their regular salaries. For 2009, up to 12 officers or critical employees could receive compensation up to 120 percent of the total annual compensation of the vice president, or $272,760 for 2009, the report said.

In addition, the inspector general’s office said postal executives are allowed to receive additional benefits not subject to the compensation cap. For 2009, six of 44 postal officers were given a total of $502,395 in deferred compensation, the inspector general found.

Mr. Potter retires effective Dec. 3 after 32 years with the Postal Service and nearly a decade as postmaster general. His salary and incentive bonus payment, coupled with $219,000 in pension and other earnings, brought his overall compensation package to $798,000, records show.

But almost $220,000 was an increase in the value of his civil service retirement account based on an Office of Personnel Management formula.

• Jim McElhatton can be reached at jmcelhatton@washingtontimes.com.

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