Senior executives at Network Rail have bowed to almost a week of sustained political pressure by giving up potential annual bonuses totalling more than £1m.
Sir David Higgins, who took over as chief executive of the quasi-private owner of the rail network a year ago, said on Monday he would waive any pay-out he may be due, which could have seen him receive up to £340,000, or 60 per cent of his £560,000 salary.
Five other directors will also surrender their entitlement to annual bonuses and all six have offered to put any pay-out into the company’s fund to improve safety at level crossings. Network Rail faces prosecutions over two fatal accidents: in 2005 at a level crossing, which killed two girls and a 2007 derailment that killed one person.
The move by the company, which is technically part of the private sector but receives £4bn a year in taxpayer funds as well as indirect subsidies, comes just a week after Stephen Hester, the chief executive of RBS, the majority state-owned bank, dropped his plans to take a £1m bonus after a public outcry.
Network Rail said it was postponing a meeting of its 79 “members” – who are tasked with holding the company to account – scheduled for Friday, which was due to vote on a new executive bonus scheme. Network Rail bonuses have caused controversy and the old executive scheme was suspended in a shake-up 18 months ago.
Over the weekend, Justine Greening, the transport secretary, had threatened to vote against the group’s new scheme at the meeting on Friday. This followed a warning from Ms Greening last week to Network Rail urging restraint on bonuses.
The coalition insisted that it has not been bounced into its tough stance on public sector pay as a result of the “responsible capitalism” crusade by Ed Miliband, the Labour leader.
Downing Street refused to be drawn on Monday on whether ministers would put pressure on the Royal Mail to prevent a large bonus to its chief executive – or if they would take a stand against other examples of “inappropriate” bonuses in the public sector.
Rick Haythornthwaite, Network Rail’s chairman, said the directors would have only been awarded annual bonuses in May, after the end of the financial year, if the company had surpassed “stretching performance thresholds”.
Sir David said: “Even if this situation does arise this year, I and my directors decided last week that we would forgo any entitlement and instead allocate the money to the safety improvement fund for level crossings.”
Speaking to the Financial Times last week before the row blew up, Sir David said if the company could not pay bonuses there would be problems attracting and retaining senior staff.
Ms Greening had made clear that she was not against performance-related pay but had expressed concerns about the structure of the proposed new bonus scheme and wanted Network Rail to wait for the publication in several weeks of a policy paper on the rail sector, which will address corporate governance at the group.
The proposed scheme included annual and long-term elements. The five-year incentive plan, as envisaged, would pay out up to £15.6m split between the top 10 directors if targets, defined by the Office of Rail Regulation, are met. Payments would be spread over three instalments and depend on a director’s continuing service.