Board changes

A number of changes to the composition of the board have taken place during the year. In each case the committee carefully considered the implications on remuneration.

Departure of Steve Fraser

Steve Fraser resigned and left his role as chief operating officer on 31 August 2019. He was paid his contractual salary and benefits until his leave date but his eligibility to receive a bonus in respect of 2019/20 was forfeited. At the point of his departure Steve had three unvested DBP awards. The rules of the DBP do not require the committee to exercise discretion over unvested awards held by leavers, and so his awards will remain unvested until their original vesting date i.e. three years after their respective grant date.

Steve's 2016 LTP award vested on 10 September 2019. He remained entitled to receive the vesting award because he was still employed at the point that the performance period ended on 31 March 2019. The award was not subject to a further holding period because it was granted in 2016 prior to his appointment as an executive director. His 2017 and 2018 LTP awards lapsed on his termination, and the committee exercised its discretion when determining that he should not receive a 2019 LTP award. Clawback and malus provisions applicable to the incentive schemes continue to apply in line with the relevant scheme rules.

Chairman succession

Sir David Higgins was appointed as a non-executive director and chairman designate of the company with effect from 13 May 2019, and as Chairman commencing on 1 January 2020 when Dr John McAdam stepped down from the board. The annual fee paid in respect of his period as non-executive director and chairman designate was £80,000, and when his responsibilities as Chairman started on 1 January 2020, his annual fee increased to £300,000. In line with the remuneration policy, Dr McAdam ceased to receive fees following his departure and received no other benefits or payments in relation to his stepping down from the board.

Retirement of Russ Houlden (in July 2020)

On 5 February 2020, Russ Houlden submitted notice of his intention to step down from the board the day after the AGM on 24 July 2020 and retire from executive director responsibilities. Russ will be treated in line with the remuneration policy for retirees. His outstanding DBP awards will continue to vest on the normal vesting dates, in accordance with the rules. The committee exercised its discretion to allow good leaver status for his outstanding LTP awards. The performance conditions and holding period requirements will continue to apply and a pro rata reduction will be made to the 2018 and 2019 LTP awards to reflect the proportion of the performance period served. The committee determined that he will not be granted a 2020 LTP award. His bonus for 2019/20 will be paid as normal, with 50 per cent being deferred in to the DBP for three years. He will be eligible for a prorated bonus payment in June 2021 in relation to the bonus year 2020/21 but in line with the plan rules any bonus due then will be paid in cash in full with no element deferred into shares. Due to the vesting and deferral requirements, he will continue to maintain an interest in shares of the company for at least two years post cessation of employment. The committee has taken steps to ensure that the ongoing treatment of his outstanding incentives may be revisited in certain circumstances after his departure.

Appointment of Phil Aspin (in July 2020)

On 28 February 2020 it was announced that, following a rigorous appointment process, Phil Aspin would succeed Russ Houlden as chief financial officer after the AGM in July 2020. Phil's remuneration package will be set in accordance with the approved remuneration policy and will include a pension contribution aligned with the workforce rate. Full details will be included in next year's directors' remuneration report.

Remuneration philosophy

There are three key principles of our approach to executive remuneration.


to our purpose, vision and strategy


great customer service

Create long-term value

for all of our stakeholders

Executive directors' remuneration policy

Elements of executive directors' pay

A significant proportion of executive directors' pay is performance-linked, long-term and remains 'at risk' (i.e. subject to withholding and recovery provisions for a period over which the committee can withhold vesting or recover sums paid):

Fixed vs performance-linked (%)(1)

Fixed 33%
Base salary 26%
Pension and other benefits 7%
Performance-linked 67%
Annual bonus – cash 17%
Annual bonus – shares 17%
Long Term Plan (LTP) 33%

Short-term vs long-term (%)(1)

Short-term 50%
Base salary 26%
Pension and other benefits 7%
Annual bonus – cash 17%
Long-term 50%
Annual bonus – shares 17%
Long Term Plan (LTP) 33%


(1) Based on maximum payout scenario for executive directors assuming the normal maximum award level of 130 per cent of salary for the Long Term Plan (LTP).

Pay at risk

Further details on what triggers the withholding and recovery provisions can be found in the Appendix 1: Directors' remuneration policy (abridged).

Implementation of directors' remuneration policy in 2019/20

The table below summarises the implementation of the directors' remuneration policy for executive directors in 2019/20. For further details see Annual report on remuneration.

Key elementImplementation of policy in 2019/20
Base salary
  • Salary increase of 2.0 per cent from 1 September 2019 (the general employee base salary increase in 2019 was 3.0 per cent).
Benefits and pension
  • Market competitive benefits package.
  • Cash pension allowance of 22 per cent of base salary.
Annual bonus
  • Maximum opportunity of 130 per cent of base salary.
  • 2019/20 annual bonus outcome of 70.7 per cent of maximum.
  • 50 per cent of 2019/20 annual bonus deferred in shares for three years.
  • Withholding and recovery provisions apply.
Long Term Plan
  • Award of 130 per cent of base salary.
  • Estimated long-term incentive vesting of 79 per cent for the performance period 1 April 2017 to 31 March 2020.These awards will vest after an additional two-year holding period.
  • Withholding and recovery provisions apply.
Shareholding guidelines
  • Personal shareholdings for Steve Mogford and Russ Houlden remain above the 200 per cent of salary minimum guideline.

Single total figure of remuneration for executive directors for 2019/20

Fixed pay comprises base salary, benefits and pension. Further information on the single figure of remuneration.

Long-term incentives
Annual bonus
Fixed pay

Key performance indicators (KPIs) performance

Annual bonus –
Year ended 31 March 2020
Long term plan –
Three years ended 31 March 2020
Underlying operating profit(1)C-MeX ranking versus
the other WASCs
Written complaintsOutcome delivery incentive (ODI) compositeTime, Cost and Quality index (TCQi)Total shareholder return (TSR)(2)Underlying dividend cover(3)Customer service excellence(4)









£882.7m3rd out of 1114.63£22.4m95.1%17.5%1.324th out of 11


At or above stretch target

Between threshold and stretch targets

Below threshold target

  1. For the purpose of annual bonus, underlying operating profit excludes infrastructure renewals expenditure and property trading.
  2. Between threshold and stretch versus the comparator group. See Annual report on remuneration for further details.
  3. Average underlying dividend cover over 2017/18, 2018/19 and 2019/20.
  4. The estimated ranking versus the other WASCs in a combined customer service measure comprising C-MeX and written complaints.

Annual bonus and long term plan (LTP) outcomes

The charts below show the results of the performance against targets for the annual bonus and LTP schemes. Further information on the annual bonus can be seen in the Annual report on remuneration and on the LTP in the Annual report on remuneration.

2019/20 Annual bonus outcome

Estimated 2017 Long term plan (LTP) outcome

Underlying operating profit

CMeX ranking

Written complaints

Outcome delivery incentive (ODI) composite


Personal objectives

Relative total shareholder return

Sustainable dividends

Customer service excellence