Network Rail, the 'not for dividend' successor to Railtrack, today unveiled demanding
performance targets which link executive pay to improvements in rail services.
The Management Incentive Plan (MIP) ensures that senior executives will only receive
bonus payments if real benefits for the travelling public are delivered.
Network Rail is a company limited by guarantee with Members instead of shareholders
and so the question of putting shareholders interests before those of passengers
does not arise. The new Management Incentive Plan is specifically designed to
align executive remuneration with the interests of rail users; their interests
will be identical.
The Management Incentive Plan for next year will be reviewed in conjunction
with the forthcoming business plan and will include a long term incentive mechanism.
Ian McAllister, Chairman of Network Rail, says: "This incentive plan
will reward senior executives only if they deliver significant improvements
in rail network performance. If performance does not improve, there will be
no bonus payments.
"This scheme directly links executive pay to success in meeting three
key challenges facing the rail industry - improving performance, tackling costs
and delivering our vision of engineering excellence.
"It is essential that Network Rail is able to attract and retain senior
executives of the highest calibre. That means we have to be able to remunerate
them accordingly but only if the travelling public enjoy a measurably better
rail network."
For media enquiries please contact Jon Simmons at Financial Dynamics on 020
7831 3113.
Notes to Editors
Management Incentive Plan (MIP)
The Management Incentive Plan (MIP) announced today applies to a limited group
of individuals and covers some six months (from date of the acquisition of Railtrack
PLC by Network Rail to 31 March 2003). It provides an incentive regime based
on the achievement of the business plan goals agreed with the Strategic Rail
Authority. The MIP applies to the following Executive Directors (and newly appointed
executives who joined the company as part of the Network Rail acquisition):
| Director |
Annual Salary £ |
| John Armitt, Chief Executive |
450,000 |
| Iain Coucher, Deputy Chief Executive |
400,000 |
| Ron Henderson, Group Finance Director |
300,000 |
| Peter Henderson, Project & Engineering Director |
300,000 |
| Chris Leah, Safety & Compliance Director |
300,000 |
Additional executives will participate in the 2003/2004 scheme bringing the
total to about 30.
The overriding purpose of the MIP is to create the potential to reward outstanding
performance based on individual contribution and the overall business performance
of Network Rail in meeting the objectives of the Business Plan. The business
and individual elements of the plan each provide half of the potential incentive
payment.
The measures of overall business performance are:
- Public performance - the percentage of trains arriving less than
5 minutes late at final destination or less than 10 minutes late for inter-city
operators.
- Passenger capability - a volume based measure dependant on the
growth in actual passenger train miles and passenger train operators' revenue
from fares.
- Freight capability - a volume based measure dependant on the growth
in freight train miles and tonne miles.
- Financial efficiency - a measure of the efficiency of operations,
maintenance, track renewals and other key central expenditure.
- Asset stewardship - an index which reflects the overall status
of a number of contributory indicators of the condition of the network.
The measures of individual performance are:
- Employee engagement - a measure of the level of employee engagement
with the business of Network Rail across all business areas (good levels of
employee engagement are reflected in improved retention of employees, business
unit productivity, profitability, customer service and safety performance).
- Two Departmental KPIs - Business Unit objectives have been set
for each executive using the most appropriate KPIs. For example, the Chief
Executive and Deputy Chief Executive are incentivised to reduce the level
of Network Rail-caused train delays.
- Financial measure - targets in respect of Business Unit Financial
Measures have been assigned to each executive.
- Individual assignments - objectives in respect of individual assignments
have been set based on the delivery of Action Plans designed to transform
Network Rail.
The Remuneration Committee is also required to consider the company's net debt
and determine, at its discretion, the amount by which any award should be reduced.
Furthermore, the Remuneration Committee may reduce incentive payments to take
account of safety factors or issues.
The remuneration potential has been benchmarked against external benchmarks
for comparable organisations. Participants are eligible to receive bonuses based
on demanding targets but no bonus is payable if Network Rail fails to reach
the minimum performance levels. In the event that the very highest levels of
performance are attained, the maximum possible entitlement is 80% of basic salary
for the relevant period. Based on current projections of performance for the
period to end March 2003 and subject to the discretion of the Remuneration Committee,
it is not expected that significant incentive payments would be payable for
this period.
The full Management Incentive Plan statement, published in accordance with license
condition 28, can be found in the Document
Libraray on this website.
Network Rail is the new operator of Britain's rail network, the 'not for dividend'
successor to Railtrack. Its objective is clear, to provide safe, reliable and
efficient rail infrastructure.
Network Rail owns and maintains the tracks, signals, tunnels, bridges, viaducts,
level crossings and stations of Britain's railway. It provides access to the
tracks and stations for every passenger and freight train, timetables their
movements and operates the signalling.
Network Rail's focus is narrow - operations, maintenance and renewal. Its vision
uncompromising - engineering excellence for Britain's railway. The company is
determined to build upon the high levels of safety which exist in every aspect
of its activities.
Network Rail is a company limited by guarantee with members instead of shareholders.
It is run along commercial lines but any operating surplus is re-invested in
the rail network. This innovative structure ensures that investment is funded
at very low cost and the suggestion of putting profit before safety is removed.
Network Rail has one main priority: to fix the railway. Major enhancements will
be developed by separate Special Purpose Vehicles led by the Strategic Rail
Authority. Network Rail will pursue a dedicated focus on its critical role of
delivering engineering excellence for Britain's railway.
