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Thames Water is one of six water companies that are barred from paying boss bonuses as ministers crack down on industry-wide “unfair” payments in the political crosshairs.
The background intervention covers bonuses related to fiscal year 2024-25 and applies to Thames Water, Yorkshire Water, Anglia Water, Wessex Water, United Utilities and Southern Water, the government said.
The bonus ban applies only to a small number of CEOs and Chief Financial Officers, not to other senior executives in the industry.
Environment Secretary Steve Reid said the new rules that come into effect Friday mean that if water companies do not meet either the core environment, financial resilience or consumer standards, bonuses will not be allowed.
The new power to ban bonuses was given to regulators through the Water (Special Measures) Act, passed by Congress earlier this year, in the wake of an increase in bills across the sector and public protests over sewer leaks.
Environmental sector DEFRA said the rules would lead to a bonus ban on six specific companies.
Reed said Waterbos has awarded more than £112 million bonuses and incentive payments over the past decade.
Last year, the sector gave a total bonus of £7.6 million, the lowest level in a decade.
“Like anyone else, the water boss should only get a bonus if they work well. Certainly not if they can’t tackle water pollution,” Reed said.
Thameswater, who struggles to float after private equity group KKR withdraws its £4 billion rescue bid this week, has been criticized for its generous approach to bonuses.
The company, struggling under a £20 billion debt pile last year, gave CEO Chris Weston a bonus of £195,000 for just three months to get a job, while at the same time giving Chief Financial Officer Alastair Cochran a performance award of £446,000. Cochrane resigned in March. These payments will not be blocked by the new ban, as they cover periods prior to April 2024.
Thames Water attracted further criticism last month after releasing details of “retention payments” in favor of some executives by agreeing to an urgent £3 billion loan. The company has since said it has “decided to suspend the retention scheme” while awaiting further guidance from OFWAT.
The fisheries have defended incentive schemes by arguing that they are essential to attracting and retaining key talent. Thames Water Chairman Ir Adrian Montague told MPS last month that the senior management team was the company’s “most valuable resource” and therefore incentives are needed.
The government argues that limiting bonuses in some companies is a “strong incentive” to improve industry performance.
The Wessex bonus ban comes after the company was found to have criminally negligent in a sewer leak that killed thousands of fish.
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According to the government, the Thames water ban exceeded its poor financial resilience and seven environmental incidents. The Yorkshire ban was nothing more than a failure to consumer standards and environmental violations.
The other three saw the bonus ban imposed after each suffered one environmental violation.
Thames Water declined to comment. Wessex Water said its own policy has stopped paying boss bonuses following the pollution incident, and Yorkshire Water said that CEO Nicola Shaw has already decided not to win the award this year. United Utilities said it complies with the new rules, and Southern Water said it is waiting for details on the policy. Anglia Water did not respond to requests for comment.
