Royal Mail is to appeal against a £11.4m fine imposed over the amount of post being lost, damaged or stolen.
The firm was constantly looking to improve service, said Mr Crozier
Chief executive Adam Crozier said the record fine was "unfair" because the service was improving and the penalty would not be used to help customers.
Regulator Postcomm found Royal Mail guilty of "serious breaches" of its licence in relation to mail security measures and staff vetting.
Its inquiry took place after reports some staff were tampering with mail.
Royal Mail could also be fined £270,000 for poor delivery performance in London during 2004-5.
'Quality of service'
Royal Mail said the level of lost mail had halved over the last three years, while stolen mail accounted for just 0.001% of the 22 billion items handled every year.
"We are constantly looking to improve our performance," Mr Crozier told the BBC.
"We don't think the level of the fine is right today, for the simple reason, most of all it does not help customers.
"The fine goes to the Treasury. It does not get ploughed back into quality of service for our customers."
He said: "It is very important we continue to improve our service. We are aware of that."
Under legislation passed in 2000, Postcomm has the right to fine Royal Mail up to 10% of its annual turnover if it is found to have breached its licence obligations.
Royal Mail was fined £7.5m in 2003 - the largest fine levied to date - after it was found to have missed performance standards for delivering business mail.
In its investigation, Postcomm found that many Royal Mail agency staff were not properly vetted before being employed and that this had compromised the safety of deliveries.
It also concluded that co-ordination of measures to prevent theft and damage were "ineffective" and that Royal Mail had failed to adequately monitor the effectiveness of its own procedures.
Postcomm said Royal Mail had made significant efforts to tackle the problem over the past nine months.
However, it said the proposed fine reflected the "extent and seriousness" of the identified shortcomings, most of which could be put down to "management failings".