Water companies urged to link CEO pay with environmental performance

Ofwat has called for performance-related executive pay that reflects environmental impact

Performance-related executive pay of water companies must reflect their delivery for customers and their environmental pledges.

Ofwat sent a letter to the remuneration committees of water firms to reiterate its expectations on their approach to performance-related executive pay for 2021-2022.

In the letter, Ofwat Interim Chief Executive Officer David Black wrote: “We were also clear as part of the 2019 price review that performance-related executive pay should demonstrate a substantial link to stretching performance delivery for customers which includes environmental commitments
and obligations.

“We, therefore, expect companies to ensure that these outcomes are reflected in performance-related pay for executive directors, including recognition of poor performance and any non-compliance with regulatory and statutory obligations.”

In recent months, there have been many concerns about the impact of the performance of water companies on the environment.

A recent report by the Environmental Audit Committee found that just 14% of rivers in England can currently claim to have good ecological status.

The EAC also concluded that the government is not on track to meet the Water Framework Directive requirement for all rivers to reach good status by 2027.

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