Thames Water’s chair faces scrutiny over comments on company bonuses, as the government considers blocking payouts that could reward executives for their loyalty rather than performance.
The chair of Thames Water, ‘Sir Adrian Montague,’ is facing questions after comments he made to MPs about paying bonuses out of an emergency £3bn loan. The company has been struggling with record sewage spills and heavy debt, prompting concerns that the bonuses could be a crony payout.
Thames Water is a British water and sewerage company that provides services to over 15 million customers across the Thames Valley region.
The company was privatized in 1989 and is currently owned by a consortium of investors, including Mubadala Investment Company and KKR.
Thames Water's operations include managing water treatment plants, reservoirs, and distribution networks, as well as collecting and treating wastewater.
The company invests heavily in maintaining its infrastructure and has implemented various initiatives to reduce leakage and improve customer service.
What did the creditors say?
According to sources close to Thames Water, it was executives at the company who pushed for retention incentives as a condition of accessing the loan. However, the term sheet for the loan simply agrees that retention payments could be a factor, and this was agreed to by the ‘creditors,’ not insisted upon by them.
The lenders also stated that accessing the loan was not contingent on paying bonuses to Thames Water executives. Montague’s comments suggest that senior managers were the company’s ‘most precious resource’ and that the group of lenders had asked for retention payments.
Bonuses funded by customers
Thames Water has maintained that the bonuses will be funded by the lenders, not customers. However, this claim contradicts the company’s own statement, which says it is progressing a complex turnaround and restructuring process to deliver better results for its ‘customers.’
Government intervention
The government has already stated its intention to block the bonuses under the new rules, which give Ofwat powers to ban financial rewards for executives presiding over a failing company. A consultation on the new bonus rules is ongoing, with ministers hoping they will be in place by June.
Retention Payments and Executive Accountability
The controversy surrounding Thames Water’s bonuses highlights concerns about executive accountability and the need for transparency in corporate governance. The company’s proposal to pay retention payments out of an emergency loan has sparked outrage among critics, who argue that it is a crony payout that rewards executives for their loyalty rather than performance.
Consequences for Thames Water
The government’s intervention could have significant consequences for Thames Water, including the potential for fines or even renationalization. The company has already won a court battle to accept the loan, which comes with an expensive 9.75% interest rate and fees.
As the consultation on new bonus rules continues, it remains to be seen how the government will balance its efforts to promote accountability and transparency in corporate governance with the need for companies to operate efficiently and effectively.
- theguardian.com | Thames Water chair could face questions after comments to MPs on bonuses
