Network Rail directors told to take pride not cash as mega bonuses cut
(Guardian (UK) Via Acquire Media NewsEdge) Network Rail plans to rein in executive pay by slashing bonuses for directors, cutting the maximum award from 160% to 20% of annual salary.
The reformed scheme would still potentially net the highest paid director up to an extra pounds 135,000 a year, but will go a long way to defusing rows over bonuses that saw directors in line for seven-figure payouts from a state-funded company.
Pressure has been heaped on Network Rail after inquiries into level-crossing safety. In 2012 directors waived all due bonuses after the company was found guilty of safety breaches that led to the death of two schoolgirls at an Essex level crossing in 2005.
In a separate case in January this year, a court of appeal judgment again linked bonuses to railway safety, suggesting cutting bonus to "incentivise the executive directors . . . to pay the highest attention to protecting the lives of those who are at real risk from its activities."
In March, the transport select committee also warned in a highly critical report on level-crossing safety that it would "be very concerned if its remuneration committee awarded bonuses to executive directors this year".
Network Rail's mounting debts of around pounds 30bn will be added to the public balance sheet from September this year, shining a further light on its finances.
Annual bonuses will be deferred for three years to allow the track operator's remuneration committee to satisfy itself that meeting performance targets - safety, train punctuality, cost-efficiency, investment delivery and passenger satisfaction - leads to a sustained improvement. No additional long-term awards will be made. Network Rail said directors' base salaries would not be altered to compensate for reduced bonuses.
Richard Parry-Jones, Network Rail chairman, said: "The potential to earn large bonuses is no longer sustainable in the environment in which this company operates. The executive directors and the board both have responded by putting forward this radical bonus proposal that sees directors bonuses massively reduced."
Mark Carne, chief executive, said: "No other company can offer its people the sense of satisfaction and pride that comes from delivering a public service, which is so critical to the country's infrastructure and economy. This is our unique selling point and why I'm confident that we will retain and attract the best people.
The bonus structure, for the five-year funding period starting April 2014, covers Carne, who earns pounds 675,000, and group finance director Patrick Butcher (paid pounds 391,000 in 2012-13, the last year of published salaries), network operations managing director Robin Gisby (pounds 368,000) and route strategy director Paul Plummer (pounds 346,000).
Labour's shadow transport secretary, Mary Creagh, said: "We welcome the end of Network Rail's mega-bonuses. Most hardworking people receive no bonus for doing their jobs, let alone one that more than doubles their salaries."
Manuel Cortes, leader of the TSSA rail union, said: "Network Rail is funded by the taxpayer to the tune of pounds 4bn a year. Safety should be its number-one priority, not imitating the 'get-rich-quick' mentality of wide boys in the City."
The maximum award Network Rail's directors can expect, cut from 160% of salaries under previous remuneration
(c) 2014 Guardian Newspapers Limited.
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