The Price of Power: Wide concern over utility 'gravy train'

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The Independent Online
COMPLAINTS about the executive gravy train in the water and electricity industries intensified this week with news that a two- day-a-week chairman could retire with more than pounds 1m. Bryan Weston's reward for working at Manweb electricity company is the latest in a string of deals.

Concern has also spread to the privatisation of the Post Office. As Hugh Dykes, the Conservative MP, said yesterday: 'The suspicion is bound to linger in the public mind that senior executives are not only in favour of full privatisation for what they perceive as genuine operational objectives, but also as an opportunity to reward themselves like some water company chiefs.'

The 12 water companies have come in for most criticism because they were first to publish the accounts that detail their executives' pay. Electricity companies, who will soon drip-feed their reports into the public domain, are braced for similar accusations about executive greed.

Last month John Bellak, ex- chairman of Severn Trent Water received pounds 512,626 compensation for early retirement, plus his pounds 230,300 salary. Sir Desmond Pitcher, chairman of North West Water, was paid pounds 338,000 last year, 42 per cent up on his predecessor's salary. The Consumers' Association said massive pay rises were ridiculous when thousands of customers had difficulty paying their bills.

'Clearly it is setting the wrong tone,' a spokesman said.

What angers many people is that the boards of the utilities are filled with people who were water industry civil servants or engineers before privatisation, but just happened to be in the right place at the right time.

Ian Preston, chief executive of Scottish Power, saw his pay rise from pounds 63,000 before privatisation in 1991 to pounds 255,000 in 1993-94. David Morris, chairman of Northern Electric, was paid pounds 72,000 in 1989-90, rising to pounds 208,000.

Senior executives not only receive a basic salary but, as in Mr Weston's case, are granted options to buy shares at specific prices. It is a common practice, and one that is supposed to encourage management to reach a performance target. But reports of South Wales Electricity executives making paper profits of pounds 500,000 for a job well done is no comfort to customers who have seen their bills rise. Furthermore, as one pay consultant pointed out: 'Pay rises bear little or no relation to the financial performance of the companies. It is easy for companies to modify performance targets to ensure that their benefits go up and never down.'

Utilities chiefs argue that their businesses have changed radically, demanding a new breed of manager. A spokesman for an electricity company said: 'Why pick on the utilities? Some youngsters in the City earn vastly more than electricity chiefs but they are never held up as merciless and greedy.'