Posted 3rd February 2012 | 4 Comments
Storm grows over Network Rail executive bonuses
The latest round of bonuses would include a payment of £336,000 to chief executive David Higgins, seen here
TRANSPORT SECRETARY Justine Greening has dubbed the latest proposals for Network Rail directors' bonuses as 'unacceptable', and is calling on the company to 'exercise restraint'.
Network Rail's 120 'members', who play the part of non-existent shareholders, are due to consider the latest round of bonuses on 10 February. These are set to be 60 per cent of directors' annual salaries, resulting in a payment of £336,000 to chief executive David Higgins and other six-figure payouts to his colleagues.
Ms Greening has entered the fray following criticism of the bonuses by the opposition. She said: "These latest bonus proposals are unacceptable. Network Rail needs to be responsible and exercise restraint.
"Labour designed a system where Ministers have no powers to block Network Rail executive pay and which in 2008 saw bonuses of over half a million given out to the chief executive [Iain Coucher] even when there were serious failures. This is clearly a flawed system which we have already addressed as part of our forthcoming Rail Review, which will make Network Rail more accountable.
"In the meantime the Labour Party should apologise for creating this system in the first place."
Network Rail was set up by the Labour government following the placing of Railtrack in Railway Administration in October 2001. NR took over from Railtrack a year later as a theoretically private sector company which is not, however, owned by shareholders nor listed on the stock exchange.
The structure of NR means that, as a 'not for profit' company, it is still run by its directors and members rather than the government, which used to be able to directly influence British Rail before privatisation because that was a state-owned corporation.
One NR member, Tony Berkeley, has tabled a motion calling for bonuses to be capped at 30 per cent of each director's annual salary.
28 Labour MPs have also signed a Commons Motion tabled by former rail minister Tom Harris urging Network Rail directors to reject their bonuses entirely.
It notes that 'Network Rail has been found by the Office of Rail Regulation to be in breach of its licence and that, according to the ORR, "major asset failures, congested routes and poor management of track condition" contributed to poor performance of the UK rail network in 2011.'
Reader Comments:
Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.
Jonathan Smith, Perth, Australia
Maybe this is a misuse of the word 'bonus'?
The decision to offer a bonus is commonly based on an organisation or business unit having achieved a strong result and the decision by Board or management to share the financial returns with staff who have contributed to that result.
Or, the bonus may be allocated to an individual staff member in recognition of an outstanding achievement.
The rationale is by thanking staff in this way, we hope to motivate them to continue to achieve excellent results.
So, I don't know a lot about NR's KPIs but, if they're an NFP company, I expect they might have some short-term measures about meeting specific performance targets and some longer term measures about reinvesting in the infrastructure to deliver long-term value to the people of the UK.
From this article it sounds like they've missed both those targets, so not sure how or why a bonus would be indicated?
www.jonathansmith.com.au
Stuart Parker, Ormskirk, Lancashire
Given my experience of Network Rail over the last 14 months or so,I think Mr Higgins should get a swift kick in the backside,let alone a bonus.
Steve Alston, Crewe
The (very) handsome salary alone should be reward enough for being a successful boss. Instead of giving them a bonus, why not simply allow them to stay in their job as happens to all others in society when they do their job as per their contract. If an ambulanceman does three extra 999 calls a day within his shift, does he get paid extra? No. As public money is involved at Network Rail, and them having some utterly shocking salaries, there should be a lot more control over the purse strings as it's money that should be spent on progressing our railway.
Anonymous, Derbyshire
Ms Greening I am sure will reject and pay increase or bonus then.Why does this country insist on penalising people who are successful and throw money at those who choose to learn how to abuse the system?