Ofwat moots tighter checks on executive pay

Ofwat has signalled it is considering further action to get water company executive pay into line with public expectations.

Speaking at the Westminster Energy, Environment and Transport Forum’s water conference on Friday, senior director for company performance and price controls, Aileen Armstrong, said: “We have been clear that performance-related executive pay must demonstrate a substantial link to stretching delivery for customers, including the environment. And taken in the round, regrettably, we don't see this outcome has yet been achieved.”

Among Ofwat’s disappointments, she reported, were that some remuneration committees have not showed restraint when environmental performance has fallen short, and that the reasons for payments have not been well explained.

Armstrong said: “We intend to take further steps to reinforce expectations in this area to ensure customers' interests are protected. There are a number of ways to approach this. For example, we could use targeted principles backed by the licence. Or perhaps we could approach this through cost allowances, in circumstances where it is not reasonable for customers to pay for rewards.”

Elsewhere in her presentation, Armstrong told companies to improve service delivery levels, open their data, redouble their efforts on compiling robust water resources and drainage and wastewater management plans, and innovate with tariffs to support customers with cost of living pressures.