Network Rail bonuses, Iain Coucher's resignation and related posts

[whole diary]

[Chris from Nailsea]

From New Civil Engineer:

Network Rail seeks external candidates for Coucher replacement

Network Rail is looking outside its business to fill the role of chief executive, NCE has learned.

The rail infrastructure owner and operator is now on the hunt for someone to fill the role when outgoing boss Iain Coucher leaves.

It means that senior Network Rail figures such as investment projects director Simon Kirby and operations and customer services director Robin Gisby will be unlikely to apply for the top job.

According to Network Rail, Coucher is assisting the board and chairman Rick Haythornthwaite in the search for his successor. But it is likely the company will want to find someone who can begin to forge a closer relationship with the new coalition government.

Transport secretary Philip Hammond has made little attempt to conceal his dismay at Network Rail^s since its decision last month to award large bonuses to its senior executives.

The firm^s six executive directors will receive annual incentives totalling ^1.3M while Coucher will depart with ^1.25M in pay and bonuses.

The government is now eagerly awaiting the findings of transport expert Sir Roy McNulty into value for money in the rail industry. In June, Hammond requested that McNulty fast-track his initial findings, so that they can feed into October^s spending review.

The transport secretary also intimated last week to MPs^▸ (Member of Parliament) that the way Network Rail is structured and funded was under review.

Speaking to the Commons Transport Select Committee Hammond said that both issues were being looking at by McNulty and that key to resolve would be a review of the previous government^s decision to keep Network Rail debt off the balance sheet.

^I have the impression that the previous government will have on occasions been itching to intervene or give an opinion on what Network Rail was doing but had to restrain itself because of its concern about keeping the debt off balance sheet,^ Hammond said. ^I do not have any such theological focus on keeping the debt off balance sheet^ We will not allow our relationship with Network Rail to be dictated by an artificial accounting convention.^

[JayMac]

From the Daily Mail (28/09/2010):

Fat-cat pay row as man charged with delivering 2012 Olympics is named as new boss of Network Rail

The man charged with delivering the 2012 London Olympics was tonight named as the new boss of Network Rail on a controversial pay and bonus package totalling nearly ^1million a year.

The appointment of Olympic Delivery Authority (ODA) boss David Higgins as Network Rail^s new chief executive sparked an immediate ^fat-cat^ pay row and raised concern over yet another lucrative public sector merry-go-round that rewards those jumping from one tax-payer-funded enterprise to another.

Network Rail said the final details of Mr Higgins pay and bonus package were still being negotiated but that in basic pay he would earn more than he did at the ODA - up to ^450,000 - but less his predecessor Iain Coucher^s ^613,000 basic salary.

However, that still means he is on track for a basic pay of at least ^500,000, with bonuses of as much again - putting him on a package of around ^1million a year. Network Rail said the bonus package was also ^still being negotiated^.

Mr Higgins, former chief executive of construction firm Lend Lease, will succeed controversial Iain Coucher, who is stepping down at the end of October.

Mr Coucher, who has been with the company for eight years, announced his departure in June, amid outrage over his earnings. Mr Higgins, currently a non-executive director of Network Rail, will take up his new position on February 1 next year.

Outgoing chief executive Mr Coucher^s ^1.254million pay package in 2009-10 comprised an annual bonus of ^348,184, plus a long-term bonus of ^293,000 from a three-year rolling management incentive scheme. The bonus payments totalled ^641,349 - more than his ^613,000 basic salary.

And with less hyperbole from The BBC^» (British Broadcasting Corporation - home page):

Olympic 2012 boss David Higgins leaves for Network Rail

The chief executive of the Olympic Delivery Authority is leaving to join Network Rail in a similar position.

David Higgins said that it had been a privilege to lead the organisation and added that he was confident the 2012 games would be a success.

The authority's director of finance Dennis Hone will replace Mr Higgins.

Mr Hone said there would be no change in direction or focus, saying the challenges ahead would be to hit targets and bear down on costs.

2012 chairman Lord Coe also paid tribute to Mr Higgins, praising the experience and leadership skills which he brought to the project.

He said: "David's wealth of experience and his leadership puts us in an excellent position to ensure the athletes of the world have the best possible environment to compete in 2012."

Mr Higgins will leave in February next year.

Adrian Warner, BBC Olympics correspondent said: "This is a big loss, this is a man who did all the deals and the contracts. When I talk to people they say he is crucial. Effectively he drove the bus, put his accelerator down and got people on the way to 2012. What he is saying now is, 'I'm sorry we've not got to the terminus but I'm off lads'. Inevitably that will have an impact."

Mr Higgins said: "It has been a privilege to lead the ODA over the last five years. It is a great organisation with outstanding staff who can be justifiably proud of what they are achieving."

Mr Hone said: "This is a change of chief executive for the ODA but it does not mean a change of direction or focus.

"The challenge ahead of us is to continue to hit our milestones, bear down on costs and complete the venue construction at the same time as maintaining our excellent record on health and safety."

And the Network Rail press release:

David Higgins appointed Chief Executive

David Higgins has been appointed as our new Chief Executive, succeeding Iain Coucher, who is stepping down at the end of October.

Mr Higgins, who is currently chief executive of the Olympic Delivery Authority (ODA), will take up his new position on 1 February 2011. Mr Higgins is currently a non-executive director of Network Rail, a role he will continue until he starts as chief executive.

Before joining the ODA, Mr Higgins was the chief executive of Lend Lease, an international property and construction company from 1995 to 2002 before joining English Partnerships as chief executive (2003-05).

Network Rail^s chairman Rick Haythornthwaite said, ^We recruited David to the board earlier this year because of his track record in leading large organisations, delivering demanding projects and managing a complex range of commercial interests and wider stakeholder sensitivities. With Iain Coucher deciding it is the right time to leave Network Rail, David emerged as the outstanding candidate to lead Network Rail into a challenging new era following an extensive search process.

^There are significant challenges and opportunities ahead for both Network Rail and the industry such as the comprehensive spending review, the McNulty value for money review and the planning of HS2^▸ (The next High Speed line(s)). Public, passengers, politicians and the industry are demanding a better, safer railway delivered at a lower cost where success will depend on pervasive collaboration. David is well-placed to lead both Network Rail and the industry forward to meet these challenges.^

Commenting on his appointment, David Higgins said: ^It has been a privilege to lead the ODA over the last five years and I am leaving with the Olympic Park on time, within budget and with the finish line in sight.

^Looking forward, Network Rail is one of the most important companies in the UK^▸ (United Kingdom) - an efficient railway underpins a modern economy ^ and therefore a challenge I could not turn down. Network Rail and the rail industry have transformed the train service in Britain in the last eight years - trains run on time and the railway is safer than ever. My priority is to bring Network Rail and the industry closer so that together we can continue to improve service, efficiency and safety and add much needed capacity to a railway network that is nearly full.^

In the interim period prior to Mr Higgins start date and following the departure of Iain Coucher, Peter Henderson will take on the role of acting chief executive. Peter Henderson is currently Director, Asset Management.

[Electric train]

    The Daily Mail really have not got over the closing down of Railtrack they blame Network Rail for this and take the stance that many of their readers lost money   In the Daily Mail's view NR^» (Network Rail - home page) can never do anything right.

An organisation like Network Rail that is so vital to the UK^▸ (United Kingdom) economy needs a top flight executive as its CEO^▸ (Chief Executive Officer) as a nation do we really want a 3rd or 4th rate executive running NR?

[JayMac]

An organisation like Network Rail that is so vital to the UK^▸ (United Kingdom) economy needs a top flight executive as its CEO^▸ (Chief Executive Officer) as a nation do we really want a 3rd or 4th rate executive running NR^» (Network Rail - home page)?

Some might argue that's what NR have had since July 2007!

[Chris from Nailsea]

From the BBC^» (British Broadcasting Corporation - home page):

Network Rail faces probe into under-reported accidents

Network Rail (NR^» (Network Rail - home page)) has agreed to an independent review of how it reports staff accidents.

It follows concerns that managers may have been encouraged to minimise the number of reported incidents.

The company's chairman, Rick Haythornthwaite, has invited the Railway Safety and Standards Board (RSSB^▸ (Rail Safety and Standards Board)) to review the reporting system.

All injuries, diseases and dangerous occurrences must be logged under existing health and safety laws.

A spokesman confirmed that NR had been operating a system of league tables, whereby managers would have points deducted for such health and safety incidents.

"It was set up with the best of intentions, but appears to have created an incentive to under-report," said the spokesman. "It created perverse incentives."

The Unite union says that these safety records were taken into account when the company's remuneration committee decided to award management bonuses.

"It is still outrageous that senior directors can walk away with huge bonuses when NR wrongly boosted its safety record," said Unite's national officer for rail, Bob Rixham.

NR's seven directors earned ^2.36m in bonuses this year.

"NR's chairman must ensure that part of the bonuses paid to directors are recouped and donated to the transport benevolent fund," added Mr Rixham.

The union claims new data shown to the company in the last fortnight suggests that about 700 health and safety incidents are not reported by contractors every year, on top of the under-reporting by NR managers.

An NR spokesman admitted that there seemed to be a "discrepancy" between the expected number of incidents forecast under industry standards and the number NR actually reports.

"We've had a look. There seems to be a problem with our system, and we want to get to the bottom of this," said the spokesman.

NR says it has now shelved the league tables for reporting of work-related safety breaches.

Unite's health and safety officer will join the RSSB team that is examining the safety culture at NR.

[JayMac]

This story on accident under-reporting is covered in great detail in RAIL magazine issue 652, September 8th, along with an editorial comment. Makes for interesting, and somewhat worrying, reading.

Not a great fan of unions, but in this instance Unite Railway Officer Bob Rixham's dogged investigation deserves credit.

[Chris from Nailsea]

From the BBC^» (British Broadcasting Corporation - home page):

Network Rail executives not awarded bonuses

Network Rail executives will not be paid annual bonuses this year, the rail infrastructure company has announced.

There was an outcry last year when Network Rail awarded its most senior staff more than more ^2m in bonuses.

"Network Rail... will not be paying an annual bonus to its executive directors in respect of the financial year 2010-11," a statement said.

Last year's bonuses came despite the call from Transport Secretary Philip Hammond for financial restraint.

The board of Network Rail suspended the "management incentive framework" for executive directors for this financial year.

It will soon be unveiling a new scheme to take effect from 2011-12 onwards.

"There remained only the question of the basis on which any 2010-11 annual bonus should be awarded," said the remuneration committee's chairman, Steve Russell. "In a decision reached jointly by the remuneration committee and the executive directors, no consideration will be given to any such annual award mechanism and thus no payments will be made."

The bonuses had previously been made up of a yearly component and a three-year rolling bonus.

The announcement to now suspend bonuses for top-tier staff affects nine Network Rail bosses.

"All recognise that the public expect consistently high network reliability and overall service delivery within a strong safety culture before the top leadership of the company should become eligible for payment under any annual incentive scheme," said Mr Russell. "We intend to retain the past arrangements for the annual incentive scheme across all other employee grades for 2010-11 based on challenging targets that were established at the beginning of the year."

Network Rail took over the running of network infrastructure after the collapse of Railtrack in 2002.

The RMT^▸ (National Union of Rail, Maritime & Transport Workers) union said it "welcomed" the news on the bonuses, but said the main task now was to he "transform Network Rail into a genuine public body" and away from a private sector ethos.

"RMT looks forward to now securing a pay deal for our members that recognises the hard work they have put in, and the changes to operations that they have agreed, and which will put staff on a firm and secure footing for the future," said RMT general secretary Bob Crow.

[JayMac]

Horse. Stable. Door. Bolted.

Coucher trousered hefty sums on top of his salary during his tenure at Notwork Fail.

[Chris from Nailsea]

From the Network Rail press release:

NEW EXECUTIVE INCENTIVE SCHEME APPROVED

Network Rail's new executive incentive scheme was approved today following an extensive and through examination by Members (Network Rail's equivalent to shareholders) at a general meeting in London. Under the new scheme the potential annual bonus for executive directors has been reduced by 40%. In addition, a new long-term scheme tied into the outperformance of the company's targets for the current regulatory control period (2009 to 2014, CP4^▸ (Control Period 4 - the five year period between 2009 and 2014)) was also approved.

Steve Russell, chairman of Network Rail's remuneration committee said: ^Network Rail plays a pivotal role in running Europe^s most intensively used rail network with the responsibility of moving almost four million people safely every day. It is a hugely complex business, investing billions each year on improvements, and helping the UK^▸ (United Kingdom) economy to continue its recovery. Having an executive incentive scheme is essential for the company to attract and retain top talent."

The Annual Incentive Plan:
The new annual incentive plan (AIP) has a maximum potential award of 60%.

Steve Russell said: ^The company has this year cancelled directors' annual bonuses and suspended its executive incentive scheme while it underwent a thorough review. This new scheme cuts the potential annual award by 40%, has tough targets, will be independently assessed by our regulator, and will only reward clear, unequivocal success and outstanding performance."

In order for an award to be made under the new annual scheme, two objectives relating to the punctuality of trains (both passenger and freight) and the condition of the infrastructure must be met. The Office of Rail Regulation^s annual assessment of our performance will inform Network Rail^s remuneration committee's judgement. Failure to meet targets in these areas will normally mean no bonus being awarded.

Assuming these hurdles are passed, there are six business goals to be measured against, each making up 10% of the potential award. In addition the remuneration committee will exercise structured discretion taking into account safety as well as passenger, customer and supplier views.

The long-term scheme:
The existing long-term incentive plan (LTIP) has been scrapped and replaced with a long-term gain-share scheme that incentivises the executive directors to outperform regulatory targets for control period 4 (2009-14) and thereby deliver even more savings for the taxpayer.

Steve Russell continued: ^The new long-term scheme will only reward sustained performance that exceeds targets and expectations. Meeting our regulatory objectives and targets over our five-year control period is not enough. Only extraordinary performance can result in the directors sharing in a portion of this success."

One of the key measures of the successful delivery of CP4 is the regulatory target of making cost efficiency savings of ^5.2bn - or 22%. If the company succeeds in delivering above and beyond this ORR^» (Office of Rail and Road formerly Office of Rail Regulation - about) target, the top ten executives may be eligible to share in these and other additional savings. This share would be in a range of 0% to 2.6% of whatever extra savings (capped at a maximum of ^600m) are made, with the extent of the extra savings being identified and verified by the ORR. Eligibility will be subject to other key regulatory targets also being met.

Notes to Editors:

Three resolutions were presented at the meeting. The first, to approve the gain-share plan (77% voted in favour). The second, to approve the transition arrangements between the old and new long-term schemes (77% voted in favour). The third to note the new annual incentive plan (83% voted in favour)
A draft of the new management incentive plan (which incorporates the new annual and long-term schemes) is available on the Network Rail website. Some details of the scheme remain to be agreed with the ORR and the final scheme will be published once settled
Any payment under the gain-share scheme will be made in three tranches with 50% of the award paid in July 2014, a further 25% in January 2015 and the final 25% in July 2015. Directors must be employed at each stage to be able to qualify
Any payments already made under the old LTIP scheme will be deducted from any potential award made under the new gain-share scheme