Water regulator Ofwat told companies to be more transparent about finances and executive pay as it launched a consultation into the 2019 price review (PR19).
Water companies must be clearer about their dividend policies and explicitly set out, in their business plans for PR19 how their approach to paying dividends relates to the service they provide to customers, said the regulator.
The consultation document says: “Resilience is one of the key themes for PR19. It encompasses all aspects of resilience including operational, corporate and financial resilience. We define financial resilience as the extent to which an organisation’s financial arrangements enable it to avoid, cope with and recover from disruption.
“We expect companies to set out, transparently for customers and wider society, in their business plans, their proposals for the performance-related element of executive pay.”
Water company bosses backed recommendations to crack down on the use of tax havens and excessive profits in the industry.
Senior industry figures met environment secretary Michael Gove last week and trade body Water UK confirmed its support of Ofwat’s proposals to tighten standards for complex financial structures and dividends.
Ofwat chief executive Rachel Fletcher said: “We are continuing to push water companies to go further, faster in reforming some of their corporate behaviours and to focus on re-establishing public trust. We are making moves on three fronts to get a better outcome for customers.
“First, any company with high levels of debt which boosts their returns, will be expected to share gains with customers. Second, companies need to ensure dividend policies are transparent and make sure they’ve met their obligations to customers before making dividend payments.
“And, third, we want to see that water company executives are rewarded for delivering for customers, not just shareholders.”