Customers should vote on water exec pay, Lord Sikka argues in peers’ debate

Labour’s Lord Sikka called for water customers to be able to vote on water company executive pay and bonuses, during a debate he secured last week on water company directors’ remuneration – or as he saw it, the “scandal of excessive pay forthe poor performance of water companies”.

Lord Sikka argued 51% of customers should have to approve basic pay as “a powerful pressure point for securing socially responsible practices” and that bonuses for extraordinary performance should need the  support of 90% of customers.

Moreover, he said the remuneration contracts of directors should be publicly available in full. “The sanitised snippets in the annual accounts—which I have read—are very economical with information and rarely mention that chauffeur-driven cars and private school and medical fees also form part of executive pay packages. There is complete silence on these things.”

Lord Sikka pointed to “five major harms” – leakage, sewage pollution, bill rises without a commensurate increase in quality of service, low infrastructure investment and tax avoidance –being peddled by the sector at present, as well as to 90% ownership by overseas investors of England’s nine large firms; dividend payouts of £75bn since privatisation “funded by debt and squeezes on investment;” “puny fines have not curbed the lust for bigger profits, pay packets and bonuses; and hollow policy to date. This included sound a fury with no follow up from Michael Gove in 2018; Ofwat’s Board Leadership, Governance and Transparency principles; and even the new announcement from Defra on a bonus ban for polluting companies which Lord Sikka said was “vague”.

Finally he branded Ofwat “a failed and conflicted regulator” with evidence of the latter including that two-thirds of England’s biggest water companies employ key executives who previously worked at Ofwat, and the EFRA Committee’s newly raised concerns regarding constraints on enforcement tied to company collapse fears.

Other peers contributed to the debate, with ideas for the future including: reforming water firms as public private partnerships; the Liberal Democrats’ plans for a sewage tax and public benefit company structures; and Baroness McIntosh who argued privatisation had been a success and challenged the Government on the timing to implement Schedule 3 of the Flood and Water Management Act.

Responding for the Government, Lord Douglas-Miller ran through the catalogue of recent Government actions in the water space, concluding: “I want to be absolutely clear that profit should never come at the cost of pollution. As I have set out, this Government are going further and faster than any before to protect and enhance the health of our rivers and seas. We are holding water companies to account on a scale never seen before.”

He added to Baroness McIntosh’s point, that the Schedule 3 consultation should be expected in Spring, with implementation due by the end of 2024.