* CEO Moya Greene backs pay decision
* Freeze is welcome news for government after IPO pricing furore (Adds details)
By Neil Maidment
LONDON, May 6 The remuneration committee of British postal company Royal Mail ruled out a pay rise for Chief Executive Moya Greene on Tuesday, avoiding a potential run-in with its largest investor, the government.
Royal Mail, at the centre of a political storm after critics claimed the October privatisation of a 60 percent stake in the business short-changed the taxpayer, said the committee had taken into account Greene's wishes in its decision not to propose an increase to base pay or new incentive arrangements.
The absence of a pay rise for Greene, who was paid a total of 1.22 million pounds ($2 million) in 2012/13, removes a potential for conflict with the government, which still holds a 30 percent stake in the firm and is trying to clamp down on rising executive pay.
Greene, whose base salary has stayed at 498,000 pounds since she joined Royal Mail in July 2010, is widely credited with transforming the postal firm from a loss-maker into a profitable FTSE 100-listed company, via cost cuts and a push towards a bigger slice of the fast growing parcels market.
In January, Royal Mail chairman Donald Brydon warned the firm should increase Greene's pay package or risk losing her.
According to the High Pay Centre, the average annual pay package for heads of FTSE 100 companies is 4.25 million pounds.
Avoiding more controversy over Royal Mail will also come as welcome relief for government ministers Vince Cable and Michael Fallon who, along with banks and advisors, have faced fierce criticism over a sell-off that trade unions and the opposition Labour Party say was botched.
Shares in Royal Mail have risen as much as 87 percent above their 330 pence launch price, offering quick profits for big banks and City investors and leading to a loss of at least 750 million pounds for the taxpayer, according to the National Audit Office.
Ministers insist the sale was a success and one which was has allowed Royal Mail access to the capital it needs to continuing transforming its business.
In November, the firm said it had almost doubled operating profit after transformation costs to 283 million pounds and in January said underlying sales were up 2 percent over nine months thanks to higher parcel prices.
The group will post its 2013-14 results on May 22.
Just five months after its privatisation, Royal Mail, which has shed 50,000 jobs in 11 years, announced more cost cuts, signalling in March it would axe a net 1,300 managerial positions from its 150,000 strong workforce.
That followed an agreement with union members in December to a 9.06 percent staff pay rise over the next three years.
Shares in the Royal Mail were up 0.6 percent to 542 pence at 1240 GMT, still 64 percent above their offer price and valuing the company at around 5.4 billion pounds.
($1 = 0.5929 British Pounds) (Editing by Kate Holton and John Stonestreet)