Before reclassification, Network Rail’s remuneration committee consisted of three or four non-executive directors, including the company’s chairman. It could also have included Transport Secretary Patrick McLoughlin’s appointment as special director. That director would have sat on the remuneration committee with at least two other non-executives. Although the special director had just a single vote (and so could be out-voted) it’s clear that he or she would have wielded considerable influence over directors’ pay on behalf of the government.
Remuneration policy
Under reclassification, the Transport Secretary sets the pay of NR’s chairman and its non-executives, and sets the remuneration policy for the board as a whole (consulting with the Chief Secretary to the Treasury as required). Although the framework agreement holds that the policy should be drawn up by the remuneration committee and approved by members, it makes clear that the Transport Secretary must approve it before any vote by members.
Under DfT plans, members will also continue to vote at annual general meetings. In this way, they will continue to elect the company’s executive directors. The Transport Secretary does not have powers in relation to the appointment of executive directors, but he must agree the process for selecting members and the skills they should have. He also selects the panel that will select members, and has the right to approve the appointment of members. Additionally, he has the right to remove all the members - in this way, he can influence the appointment of executive directors almost to the point of directly selecting them.
For other staff, the framework says: “Network Rail’s approach to reward and remuneration should reflect both its role as operator of the nation’s rail assets and its responsibility as a steward of taxpayers’ money. It should therefore be designed to recruit, attract, develop and motivate suitably skilled staff, taking into consideration value for the taxpayer as well as commercial efficiency and market conditions.”
It calls on NR to publish details for those paid more than £142,000 per year, including “specific details of the roles of the highest earners”.
McLoughlin told Parliament on September 1 that NR was an “arm’s-length body of the DfT”, but it’s clear from the framework agreement that he has gathered the key levers of influence over NR for himself. There can be no doubt that NR is truly a nationalised company in the ways that really matter.
That opens the door to privatising Network Rail in the future.
