Thames Water, along with five other water companies, has been blocked from awarding bonus payouts to its executives due to serious pollution incidents and other performance issues. Regulator Ofwat revealed that over £4million in potential bonuses were prohibited under new rules concerning performance-related executive pay.
These powers were implemented in June, following concerns that the salaries of top bosses at water firms did not reflect their environmental performance. This means that companies are now obliged to withhold annual bonuses and other awards to directors if they fail to comply with the watchdog’s regulations. These include instances of pollution, poor environmental practices, and criminal convictions.
The six companies – Anglian Water, Southern Water, Thames Water, United Utilities Water, Wessex Water and Yorkshire Water – blocked payouts due to a range of failures, primarily involving pollution.
Ofwat stated that an additional £2.4million of performance-related executive pay was not required to be blocked, but should not be funded by customers.
Among the companies that violated its rules, Thames Water recorded seven “category 1” pollution incidents, which are the most severe, in 2024.
It also breached its licence to maintain a sufficient credit rating and received a one-star rating for its environmental performance.
As a result, no bonuses or other awards were paid to its chief executive or its former finance chief, who departed in March.
Wessex Water fell foul of Ofwat’s regulations following a criminal conviction for a sewage spill last year that killed over 2,000 fish and landed the firm with a £500,000 penalty.
The utility company announced it had consequently chosen not to award any executive bonuses.
Ofwat also shared plans to overhaul regulations surrounding water companies’ annual reporting, requiring them to publicly disclose pay details for directors across regulated, group and parent companies.
In its report, Ofwat said: “More broadly, while there has been some progress in certain areas on accountability, water companies must better demonstrate that they understand the feeling of public anger on bonuses and the expectation that they are accountable, and reflect this better in their decisions on executive remuneration.”
