Water watchdog Ofwat has announced reforms to executive pay in its next price review.
It has set out how water companies will have to build in transparency about performance-related pay for top executives and justify how any extra payments that have been awarded relate to improved delivery for consumers.
It comes after Ofwat said high payouts for water company executives had damaged consumer trust.
The changes were proposed despite increased pressure on water firms to deliver a better service while avoiding drought scenarios.
Ofwat has already given water companies a target to reduce water leakage by 15% in the next funding period (AMP7). At present, around 3bn.l of water is lost through leaky pipes and other leaking infrastructure each day in England.
Ofwat chief executive Rachel Fletcher said: “The decisions some water companies have made on dividends, financial structures and top executive pay have damaged customer trust. We have looked in detail at the incentives we give water companies.
“We are strengthening the incentive on companies to improve their performance for customers and cutting the rewards that come from financial engineering. This is an important step in making sure water companies put customers’ interests and those of future generations, at the heart of all the decisions they take.”
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