Ofwat to tighten water industry bonus ban over executive payments

Ofwat is set to tighten the water industry’s bonus ban after warning that large payments to company bosses risk damaging public trust, The Guardian reported. The regulator is bringing forward a review amid concerns that firms are undermining restrictions through payments that appear to get around the rules.

Anglian Water drew particular criticism over retention payments worth up to £800,000 for its chief executive, Mark Thurston, despite the bonus ban. The company will face increased monitoring of its governance arrangements because of the payments, according to the report. That scrutiny puts both the executive awards and the arrangements overseeing them in focus.

The regulator’s concern extends beyond the size of the payments to whether the restrictions are working as intended. Its warning about public trust frames executive remuneration as a question of accountability, rather than simply an internal decision about how companies compensate their leaders. Ofwat is questioning whether the industry’s approach is consistent with the purpose of the ban.

The description of the Anglian awards as retention payments is central to the dispute. The report identifies them separately from bonuses while linking them directly to Ofwat’s concerns about the ban being undermined. It does not set out the terms attached to the awards or establish how much of the maximum £800,000 has been paid.

The accelerated review will put the effectiveness of the existing restrictions under closer examination. The issue raised by the report is whether a bonus ban can achieve its intended effect when companies make other substantial payments to executives. Any tightening would need to address the practices causing concern, although the supplied account does not detail proposed changes.

For Anglian Water, increased governance monitoring is the specific regulatory consequence identified so far. The report does not describe the scope or duration of that monitoring, or indicate whether further action will follow. It also does not include a response from the company explaining the retention arrangements or addressing Ofwat’s criticism.

The distinction between regulatory concern and a confirmed breach remains important. The report describes payments that appeared to get around the rules, rather than setting out a formal finding that Anglian Water had violated the ban. Similarly, the stated award is worth up to £800,000, not a confirmed payment of that full amount.

Attention now turns to the accelerated review and the changes Ofwat proposes to make the restrictions more effective. No completion date or detailed replacement rules are given in the supplied report. The regulator’s stated concern is that executive payment practices risk weakening both the bonus ban and public confidence in the industry.