Severn Trent Water has doubled the maximum payout under its long-term incentive plan (LTIP) for senior executives, a move that has drawn sharp criticism from consumer groups and politicians. The decision comes as the company appoints James Jesic as its new chief executive, replacing Liv Garfield who stepped down after a decade in the role.
Details of the Incentive Plan Changes
The revised LTIP allows executives to receive up to 200% of their base salary in shares, up from the previous cap of 100%. The plan is tied to performance metrics including environmental targets, customer satisfaction, and financial efficiency. The company argues the changes are necessary to retain top talent and align executive interests with long-term goals.
Criticism from Consumer Groups
Consumer advocacy group Water UK has condemned the move, stating it is “out of touch” with public sentiment, especially given the company’s record on sewage discharges. In 2023, Severn Trent Water reported over 60,000 sewage spills, a 20% increase from the previous year, according to Environment Agency data.
New CEO James Jesic
James Jesic, who previously served as chief operating officer, takes the helm amid heightened scrutiny of the water industry. “I am committed to improving our environmental performance and rebuilding trust with customers,” Jesic said in a statement. However, critics question whether the bonus scheme incentivizes genuine change or merely rewards executives for meeting easily achievable targets.
Industry Context
The water sector has faced widespread backlash over sewage pollution, with all major water companies in England and Wales under investigation by the Environment Agency. Severn Trent Water, which serves 4.6 million households in the Midlands and Wales, has been fined £2.3 million since 2020 for environmental breaches.
Financial Performance
Despite the controversies, Severn Trent Water reported a 12% increase in pre-tax profit to £1.2 billion in the last financial year, driven by higher water bills. The company’s share price has risen 8% over the past year, outperforming the FTSE 100.
Government and Regulatory Response
The UK government has pledged to introduce stricter penalties for water companies that fail to meet environmental standards. Ofwat, the industry regulator, has also signaled it will clamp down on excessive executive pay. “We are monitoring the situation closely and will not hesitate to take action if consumer interests are not protected,” an Ofwat spokesperson said.
Public Outcry
Campaign groups such as Surfers Against Sewage have called for a boycott of Severn Trent Water. “Doubling bonuses while rivers remain polluted is a slap in the face to communities,” said a spokesperson for the group. A petition demanding the reversal of the LTIP changes has garnered over 50,000 signatures.
