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Network Rail to slash directors’ bonuses

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. The company's current bonuses scheme for directors consists of a long-term element, worth up to 100% of salary, and an annual element, worth up to 60% of salary. Over the last five years the average total bonus payments to the executive directors has ranged between 50-70% of salary per year. 

Under the new scheme, however, bonuses will only be awarded if demanding targets are met 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 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.” 

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