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):

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.