Railtrack's chiefs cash in on sell-off

Directors could get 100% bonuses

Six directors of Railtrack may get bonuses of up to 100 per cent of their salaries under an incentive scheme that could add pounds 900,000 to the board's earnings and which is bound to provoke new opposition to the Government's troubled rail privatisation.

The bonuses - to be paid in shares in the privatised company - come despite a promise by Robert Horton, chairman of Railtrack, to ban "fat cat" rewards by eschewing share options.

The prospectus for the sale of Railtrack published yesterday gives details of the long-term incentive scheme. The payments exclude options and instead will be made by the company through the purchase of shares to be given to directors and top executives. This is on top of annual bonuses for the board of up to 40 per cent of basic salary.

Angered by the incentive scheme and by a decision to sweeten the privatisation with a pounds 69m dividend paid out of last year's profits - when the company was state-owned - Labour said it would mount an attempt to overturn the Government's one-vote majority in tomorrow's Commons debate. It will try to block the sale by marshalling support from Ulster Unionist MPs and Tories unhappy with rail policy.

The sale includes an unprecedented array of sweeteners to ensure successful privatisation, with discounts and bonus shares as well as the pounds 69m extra dividend.

The Oppostion's transport spokeswoman, Clare Short, condemned the sell- off, saying privatisation would damage the country's rail network and drive more people on to the roads. She said: "We believe that it's a grave breach of the national interest to sell off all our signalling, the tracks and stations in every town and city in the land at a very, very cheap price."

The controversial directors' incentive scheme requires directors to use half their annual bonuses t of salary to buy shares in Railtrack. After three years, the company will award each director a multiple of the shares he has bought, based on two key measures.

These are the growth in the company's earnings per share and a separate measure of how far Railtrack has achieved performance targets.

The maximum payout each year would be five times the amount of shares the director has bought. The view in the City was that the targets were demanding but achievable.

The prospectus said the directors had been given an ordinary bonus of 17.2 per cent in 1994-5, after theGovernment reduced it from the 25 per cent estimated by the board. For the year just ended, a 30 per cent bonus has been set, 75 per cent of the maximum.

John Edmonds, the chief executive, has the highest basic salary at pounds 168,000, and is the only one to get a rise this year - of pounds 26,000.

While Labour is not committing itself to renationalisation, the party is convinced that its campaign against the sale will dampen down enthusiasm among the general public to buy shares.

The party launches an advertising campaign today on the theme of The Great Train Robbery, with the claim that privatisation is costing every taxpayer pounds 103.

Ms Short said it would be "irresponsible" for Labour simply to threaten potential investors it would take back Railtrack if it won power. Railtrack argues that the prime reason for selling 100 per cent of the shares was not to make it harder for a future Labour government to re-nationalise the network, but to do what was right for the railway industry.

While Labour is unlikely to win Wednesday's vote, Tory MPs with doubts about the break-up of the railways were given more ammunition by figures revealed by the Capital Transport Campaign last night which showed that more than 70 per cent of passenger services in London and the south-east have deteriorated since the break-up of BR in 1994.

An alliance of unions and pressure groups opposed to privatisation said they were considering legal action over the pounds 69m dividend, which will be shared by new shareholders in October.

Jonathan Bray, co-ordinator of the Save Our Railways group, which late last year mounted a partially successful legal action against the sell- off said: "The Government is so desperate to make a success of the sale that they plan to bribe investors with a pounds 70m sweetener. We will be taking this issue up with our lawyers."

SOR launches a separate legal action today when it starts proceedings against the franchise director, Roger Salmon, over his decision to bar British Rail from bidding for the LTS franchise whose allocation was held up following revelations of a fraud.

Details were also released of a poll which claimed that half of Railtrack's senior managers and more than four out of five of its middle managers were opposed to the rapid sell-off of the company.

The price of success, page 2

Leading article, page 14