Railtrack has decided not to award share options to directors and senior executives, after strong government pressure to avoid a new "fat cats" row over privatisation next year.
Instead of options there is to be a long-term incentive scheme for directors based on performance, in line with the Greenbury Committee's recommendations on top pay. There will also be a share savings scheme for all employees.
Promising that Railtrack would be ready to go ahead with a flotation before next March, if the Government so decides, Bob Horton, chairman, said he understood the potential pay pitfalls in a privatisation: "We aren't complete idiots - we have seen what happened with other privatised industries. We don't intend to repeat that."
The announcement came as Railtrack revealed pre-tax profits of pounds 189m. This was after the pounds 140m cost of the signal staff strike and pounds 46m preparing for privatisation. The annual report showed that the chairman and four executive directors earned a 25 per cent bonus on their basic salaries last year - the year of the rail strike - and that two directors received interest-free mortgages.
The bonuses were worth pounds 150,000 in total but have not yet been paid because they have still not been agreed by the Department of Transport. Railtrack said the payments were going through "due process" and denied that there was any dispute with the Government.
Jimmy Knapp, leader of the RMT rail union, said: "Despite its problems, Railtrack appears more willing to waste money on obscene bonuses for the bosses rather than invest in industry." There was a similar attack from Lew Adams, general secretary of Aslef.
Mr Horton pledged that directors' salaries would be set at a level "generally acceptable to the entire company. It does mean you aren't going to see salaries double overnight for directors." Future increases in the pay of directors' must reflect company performance and be seen to be fair by the entire workforce, he said.
Sir George Young, the transport secretary, has been pressing for months - both in his new job and in his previous role as a Treasury minister - for tight restrictions on the rewards to be given to Railtrack directors. Mr Horton said the pay decision was made in the light of the Greenbury report and after discussions with Sir George. But he denied the decision was a result of government pressure. "I volunteered it myself, I didn't have my arm twisted," he said.
Nevertheless, the Government was keen to take some of the credit by insisting that there should be a mention in Mr Horton's announcement of the discussions with Sir George.
In the year to March, Mr Horton earned pounds 154,000 for a three-day week, including a bonus of pounds 31,000. John Edmonds, the chief executive, earned pounds 206,000 with a pounds 33,000 bonus. Mr Horton said that for both of them the increase over the previous year, when they worked for British Rail, was about 2 per cent - but Mr Horton waived his previous bonus and is accepting the latest one. Norman Broadhurst, finance director, earned pounds 197,000 including a pounds 38,000 bonus, David Moss, commercial director, pounds 140,000 including a pounds 25,000 bonus and David Rayner, director of safety and standards, pounds 134,000, with a pounds 23,000 bonus.
Mr Edmonds and Mr Rayner also have interest-free mortgages from Railtrack of pounds 75,000 each to buy London homes, because their jobs required their presence in the capital for extended periods. They have options to sell the homes at cost price to the company up to 2014.
There would be no radical changes in pay levels on privatisation, said Mr Horton, but added that if Mr Broadhurst went under a bus "we might well have to pay more than pounds 200,000 to get a new finance director".
The decision not to allow share options was taken by Railtrack's remuneration committee, chaired by Archie Norman, a non-executive director who as chief executive of Asda is an enthusiast for options.
Comment page 17
Basic Allowances Benefits Bonus Pension TOTAL
Bob Horton 22 - 1 31 - 154
John Edmonds 132 16 11 33 14 206
Norman Broadhurst* 121 - 10 38 28 197
David Moss 100 - 4 25 11 140
David Rayner 90 2 12 23 7 134
*Includes part-time salary for 7 April to 30 June 1994 and full-time salary of pounds 150,000 per annum from 1 July 1994