Network Rail members fire a warning shot over executive pay

Network Rail received a shot across the bows yesterday after members attending the not-for-profit company's first annual meeting called for the scrapping of its controversial executive bonus scheme.

Ian McAllister, Network Rail's chairman, mounted a strong defence of the scheme, which entitles five top executives to receive annual bonuses of up to 60 per cent, even if one in five trains continues to run late. The incentive scheme could boost the £450,000 salary of the company's chief executive John Armitt to as much as £720,000 this year.

But 13 per cent of the 99 members attending the meeting in Glasgow either voted against or refused to back the company's remuneration report in protest at the incentive payments, which will be triggered this year.

Philip Davis, of the West Midlands Regional Assembly, one of 83 independent public members of Network Rail, called on the board to scrap bonuses until train performance was back to the level before the Hatfield disaster in October 2000, when Railtrack was still in charge of the network. "We need not so much to draw a line under Railtrack but to dig a trench,'' he said. "We need to send a message that this is not bad old Railtrack.''

Another public member Mohamed Saheid, a sub-postmaster from Pulborough, West Sussex, said: "I believe the bonus scheme should be scrapped until we can run a proper rail system, and that is not likely to happen for years to come.''

Network Rail has admitted that train performance will not be back to pre-Hatfield levels, with 90 per cent of trains running on time, until 2008.

The level of opposition to the bonus scheme took the Network Rail board by surprise and forced Sir Robert Smith, the chairman of the company's remuneration committee, to stress that it could refuse to pay any bonuses if punctuality targets were missed.

Bonuses were not paid last year because punctuality had been "so terrible''.

But Sir Robertsaid Network Rail could not continually refuse to grant bonus payments on this basis.

Mr McAllister, who took home £289,000 last year from Network Rail, said after the meeting: "We need to put in place a structure which attracts key people and then retains them once they are in.''

The maximum 60 per cent pay-out only affects the five executive directors on the board. Apart from Mr Armitt, these are the deputy chief executive Iain Coucher, the safety director Chris Leah (who is facing charges under the Health and Safety at Work Act over the Hatfield crash), the project and engineering director Peter Henderson and finance director Ronald Henderson. Combined, they could earn £1.05m in bonuses this year on top of the £1.75m they will be paid, but only if the most stretching of all the performance targets is met.

Other members took Network Rail to task over its huge debts, which are forecast to balloon from £9.7bn to £14bn next year.