Former Postmaster Paula Vennells is handing over her CBE with immediate effect after facing mounting pressure over the Horizon IT scandal.
More than 700 subpostmasters have been prosecuted based on information from faulty programs.
Some people went to prison for false accounting and theft, while many were financially bankrupt.
More than a million people have signed a petition demanding the reinstatement of the Central Bank of Egypt.
Ms Fennells said in a statement that she had “listened” to postmasters and others demanding that she return her CBE.
“I am truly sorry for the devastation caused to postmasters and their families, whose lives have been torn apart by being wrongly accused and wrongly prosecuted as a result of the Horizon system.”
Ms Fennells has long faced questions about her role in the scandal, which has been described as one of the UK's most publicized miscarriages of justice.
She served as CEO of the Post Office between 2012 and 2019, and was awarded the Central Bank of Egypt Medal for her services to the Post Office and charitable works.
More than 700 post office branch owners and operators were wrongly prosecuted for theft, fraud and false accounting between 1999 and 2015 on the basis of false information from the Horizon programme.
Ms Fennells was included in the New Year Honors List in 2019 despite ongoing legal action against the Post Office, launched by 555 subpostmasters in 2017.
The honor was given for her work in “diversity and inclusion”, her “commitment to the social purpose at the heart of the business and her dedication to putting the customer first”, the Post Office said.
Many victims of the scandal – which began in 1999 – are still fighting to have their convictions overturned or receive full compensation after being forced to pay thousands of pounds out of their own pocket for shortfalls caused by Horizon's accounting programme.
Jo Hamilton, the former postmaster who was wrongly convicted in 2008 of stealing thousands of pounds from a village shop in Hampshire, said she was delighted Ms Fennells had agreed to return the honour.
“It's unfortunate that it only took a million people to paralyze her conscience,” she said.
Farkas Patel, whose father Vipin was wrongly convicted of fraud in 2011 after being accused of stealing £75,000 from his Post Office branch in Oxford, said Ms Fennells did not deserve her honour.
“My initial reaction was good, I'm happy. She doesn't deserve that CBE, she never deserved that CBE,” Patel told the PA news agency.
Ms Fennells joined the Post Office in 2007 and was promoted to chief executive in 2012.
She held this senior position until February 2019, when she resigned. During its tenure, the company repeatedly denied problems with its IT system, Horizon.
A government source told the PA news agency that Ms Fennells' agreement to reinstate the CBE was “the right thing to do”.
Downing Street previously said Prime Minister Rishi Sunak would “strongly support” the Medals Confiscation Commission if it decided to consider stripping the award.
A CBE (Commander of the British Empire) is awarded to a person who has gone 'above and beyond for the community or country'.
After a Gentleman or a Knighthood, it is the highest level of the Order of the British Empire, followed by an OBE (Officer of the Order of the British Empire), and then an MBE (Member of the Order of the British Empire).
Until 2012, the Post Office was part of Royal Mail before it was split. Between 2003 and 2010, Adam Crozier was CEO of Royal Mail. He went on to lead ITV and is now chairman of BT.
He was replaced by Dame Moya Green who ran Royal Mail for eight years, during which time the company was privatized and listed on the London Stock Exchange in 2013.
Justice Minister Alex Chalk said on Tuesday that the idea of using legislation to overturn the convictions of all Post Office workers implicated in the scandal was under “active consideration”.
In the House of Commons on Tuesday, former minister Nadhim Zahawi – who appeared playing himself in the recent ITV drama series Mr Bates v the Post Office – called for a “simple bill” to overturn all remaining convictions based on “bad data”.
“Until these convictions are overturned, victims cannot seek compensation,” Al Zahawi said.
In response, Chalk said the case represented a “horrific injustice” and that Zahawi's proposal was “under active consideration”.
Other prominent figures calling for legislation to speed up the process of overturning convictions include Labor colleague Lord Falconer, who was justice secretary under Tony Blair, and former Conservative justice secretary Sir Robert Buckland.
However, others disagreed, including former Attorney-General Dominic Grieve who told the BBC that it would amount to “parliamentary interference in the judicial process”.
Instead, he said each case “should be considered on its merits” and sent to the Criminal Cases Review Commission, which investigates allegations of miscarriages of justice.
The scandal has been described as the most widespread miscarriage of justice in British history, but so far only 93 convictions have been overturned, and of these, only 30 people have agreed to “full and final” compensation settlements, meaning many victims are still fighting to clear their name. Their names.
Some 54 cases resulted in either the conviction being upheld, the person being denied permission to appeal, or the appellant withdrawing from the process.
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