Thursday 18 Jul 2013
Network Rail AGM sets out progress and members approve incentive scheme to deliver better value railway for Britain
- Region & Route:
- National
Network Rail’s 11th annual general meeting has taken place today in Cardiff, at which chief executive David Higgins set out the progress made by the company in improving Britain’s railways over the past year. Highlights include:
- Passenger satisfaction reached a record high – 85%
- Passenger numbers reached 1.5bn for the first time since the 1920s
- 95% of passengers felt that rail travel during the Olympics had exceeded or met their expectations
- £4.4bn worth of work on almost 2,000 projects aimed at improving and expanding the railway was completed
- More than 200 bridges were renewed and rebuilt
- 940 miles of track was replaced
- Almost 91% of trains for the 12 months ran to time – the third best year on record although below the regulatory target
- Britain was recognised by the European Commission as the EU’s most improved railway over the last 15 years
Also on the agenda were proposals for a new long-term incentive scheme for Network Rail executive directors, which would recognise outstanding and exceptional performance in building a bigger, better value railway. The proposal was approved by 86% of Network Rail’s members* – the company’s equivalent to shareholders whose job is to hold the board to account. It was one of 22 resolutions put before them for approval at today’s meeting.
The new scheme recognises outstanding and exceptional performance over the three years to 2015, with any future awards measured against train performance, savings made for the taxpayer and the successful delivery of congestion easing projects.
The scheme was informed by discussions with members at a series of meetings and workshops. Network Rail is required to have a long-term incentive scheme in place as a regulatory licence condition and the Office of Rail Regulation has confirmed that it meets those conditions.
Network Rail chairman, Richard Parry-Jones, said: “Network Rail has had another solid year of progress and we intend to continue on this path. As our annual bonus announcement earlier this year clearly demonstrated, Network Rail senior executives are rewarded only when exceptional performance exceeds tough targets which have been approved by our members through an open and transparent process. If targets are not met, or safety compromised, no bonuses are paid.
“Discussions with our members and stakeholders and feedback from customers highlight their concerns about the cost of operating Britain’s railways and the cost of fares. These rank as highly in their minds as the punctuality of the train service. The proposed new long-term incentive scheme addressed these concerns, with a focus on safely bringing down the cost of the railway while building capacity for the future.”
Notes to editors
* About Network Rail’s members
Members perform a similar role to institutional investors in a listed public limited company, except, as a company limited by guarantee, members do not have any financial interest in the company.
As at 18 July 2013, the company had 44 members. Further details including biographies of current members and information on how to become a member can be found here.
Members are recruited on an annual basis and are currently appointed for a three-year term.
About the long-term incentive plan (LTIP) proposal
The long-term incentive plan sets out a framework against which performance will be measured. It uses the following performance measures:
Taxpayer savings (50% of total)
Measured by Financial Value Added (FVA) – A positive FVA means that Network Rail has been able to deliver sustainably the outputs as required by the ORR with less money than was made available to the company. A positive FVA therefore reflects direct savings to the taxpayer.
“Operating today” - Train performance (25% of total)
Measured by public performance measure (PPM), the standard process by which passenger and freight train punctuality is measured. The PPM moving annual average (MAA) for the year to 22 June 2013 is 91.0%.
“Operating tomorrow” - Capital projects (25% of total)
Measured by successful completion of agreed milestones on projects to deliver a bigger, better railway.
Under the scheme, payouts would commence at 25% of annual salary if performance was deemed to have exceeded expectations using the above measures.
|
% of max |
Cumulative FVA |
PPM MAA as of 31 March 2015 |
Milestones |
||
|
50% of award |
25% of award |
25% of award |
|||
|
Performance above expectations |
25% |
£75m |
92.5% |
“Delivery above expectations” |
|
|
Exceptional performance |
100% |
£450m or above |
93.0% or above |
“Exceptional delivery” |
If exceptional performance is achieved – that is, if Network Rail delivers savings to the taxpayer of at least £450m, raises train punctuality to the highest levels ever seen in this country while delivering a massive programme of capacity-boosting projects ahead of time and under budget – then the hypothetical maximum payout for the company’s executive directors would be just over £2m in total. However, as this year has demonstrated, there is no reward for failing to meet targets and underperformance in any one or more element will result in lower payments.
The view of the remuneration committee is that the scheme represents good value for Network Rail’s stakeholders and provides the right balance between reward and outperformance. For example, the performance target of 92.5% – which is the minimum required to trigger any payout under the train performance element of the LTIP scheme – is equal to the performance target set by the ORR in its recent draft determination for control period 5 (2014-19).
|
Current salary |
2012-15 LTIP award (maximum) |
Maximum potential payout (in April 2015) |
|
|
David Higgins |
£577,000 |
100% |
£577,000 |
|
Patrick Butcher |
£394,000 |
100% |
£394,000 |
|
Robin Gisby |
£371,000 |
100% |
£371,000 |
|
Simon Kirby |
£371,000 |
100% |
£371,000 |
|
Paul Plummer |
£348,000 |
100% |
£348,000 |
|
Total |
£2,061,000 |
||
About Network Rail incentive schemes
The long-term incentive plan is designed to compliment Network Rail’s annual incentive plan. Together, the two elements form the company’s management incentive plan which is designed to drive and reward exceptional and outstanding performance.
The annual incentive plan currently offers up to 60% of annual salary if stretch targets are met (reduced by 40% from a previous maximum of 100% of salary two years ago). This year’s payout was 17% of salary, which reflected some targets being met (such as passenger and train operator satisfaction) and others not (such as train punctuality). A 10% reduction was made at the discretion of the remuneration committee to reflect concerns around workforce safety.
Contact information
Passengers / community members
Network Rail national helpline
03457 11 41 41
Latest travel advice
Please visit National Rail Enquiries
Journalists
Network Rail press office - National
020 3356 8700
mediarelations@networkrail.co.uk
About Network Rail
We own, operate and develop Britain's railway infrastructure; that's 20,000 miles of track, 30,000 bridges, tunnels and viaducts and the thousands of signals, level crossings and stations. We run 20 of the UK's largest stations while all the others, over 2,500, are run by the country's train operating companies.
Usually, there are almost five million journeys made in the UK and over 600 freight trains run on the network. People depend on Britain's railway for their daily commute, to visit friends and loved ones and to get them home safe every day. Our role is to deliver a safe and reliable railway, so we carefully manage and deliver thousands of projects every year that form part of the multi-billion pound Railway Upgrade Plan, to grow and expand the nation's railway network to respond to the tremendous growth and demand the railway has experienced - a doubling of passenger journeys over the past 20 years.
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