Water bosses ‘should have pay scrutinised’ after rivers found to be dirty

Water bosses whose companies dump sewage in the UK’s waterways should have their bonuses reined in, the head of regulator Ofwat has said.

In a letter to company boards, David Black said they need to ensure chief executives are not given bonuses that “reward poor performance”.

“Companies’ performance in some areas, most notably on the environment, risks eroding trust and confidence in the sector,” he wrote in a letter sent on Friday.

“We therefore expect companies to ensure that these outcomes are reflected in performance-related pay for executive directors, including recognition of poor performance and any non-compliance with regulatory and statutory obligations.”

In January, a report from MPs on the Environmental Audit Committee found that only 14% of rivers in England meet food ecological status.

It placed blame on the Government, regulators and water companies for allowing “a Victorian sewerage system to buckle under increasing pressure”.

The letter from Mr Black reminded companies that while the current focus in the press and from MPs is on wastewater, tap water is also important.

Guidance from the Financial Reporting Council tells the committees that set pay levels for top bosses to use discretion and judgment, Mr Black said.

They also include the “need to ensure that pay outcomes should not reward poor performance”.

Mr Black wrote: “In a regulated sector such as water, we would expect to see clear evidence that this is happening as a matter of course; for example, that you have discretion to recognise shortfalls that become apparent during the year, whatever the initial framework for incentives.”

He also said that if problems are discovered down the line, companies should be able to claw back cash from their bosses.

He added: “Given the current concern about environmental performance, including the current investigations into compliance with environmental permits, we urge remuneration committees to give particular consideration to the clarity of reasoning for any awards made in this area.”