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Friday 2 May 2014

Bonuses significantly reduced in new scheme proposed for Network Rail directors

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National

A new bonus scheme for Network Rail's executive directors is being proposed that would see bonuses significantly reduced from the current total bonus opportunity of 160% of salary per year to a maximum of 20%.

Network Rail is required by its regulator, the ORR, as a licence condition, to have a remuneration plan which incentivises high performance. Under the new scheme bonuses will only be awarded if demanding targets are beaten and any awards made will be deferred for three years, to allow the company's independent remuneration committee to satisfy itself that performance was achieved sustainably.

The targets set will be in areas such as passenger, public and employee safety, train punctuality, cost reduction, investment delivery and passenger satisfaction levels.

The radically reformed bonus scheme is intended to run for the full current five year funding period - CP5 (April 2014 to March 2019) and will be voted on by Members (the company's equivalent to shareholders) at the company's Annual General Meeting in July.

Richard Parry-Jones, Network Rail chairman said, "We believe that at the start of a new five year programme, the time is right to reconsider the bonus structure for our executive directors. 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 recognise this and have responded by putting forward this radical new bonus proposal that sees directors bonuses massively reduced.

"We do understand that this will move our remuneration for executive directors further down against comparable benchmarks. However, we are confident that the unique challenge of having the executive responsibility to decide how to most effectively run Britain’s railway infrastructure is a huge motivation in itself for the kind of leaders that we need."

Mark Carne, chief executive, concluded by saying: "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 continue to retain and attract the best people.

“My team and I have a huge responsibility to deliver a £38 billion programme over the next five years. We are up for the challenge and will make the tough decisions required to drive continued improvement through the business for the benefit of rail users and taxpayers."