Why Yorkshire Water bosses have had bonuses blocked

More than £4 million of potential bonuses were banned under new rules on performance-related executive pay, regulator Ofwat said.

This means Yorkshire Water chief executive officer Nicola Shaw MBE will lose out although she had already spoken out, before the rules were introduced, to say ‘it would not be appropriate’ to take a bonus earlier this year due to the company’s record on pollution.

In March, Yorkshire Water was forced to pay £40m in a redress package by the regulator Ofwat to address its "serious failures" over wastewater and sewage. It has incurred several other large fines for incidents including an £865,000 fine in July for a 2017 incident where a water treatment works illegally discharged millions of litres of chlorinated water into a watercourse, killing more than 430 fish

The new legislation was introduced in June as a result of concerns that the pay of water firms’ top bosses was not reflecting their environmental performance.

It means companies are required to block annual bonuses and other awards to directors where they do not comply with the watchdog’s rules. This includes pollution incidents, poor environmental practices and criminal convictions.

The six companies – which also includes Anglian Water, Southern Water, Thames Water, United Utilities Water and Wessex Water – blocked payouts for a variety of failures, mostly involving pollution.

Ofwat said that a further £2.4 million of performance-related executive pay was not required to be blocked, but should not be funded by customers.

Among the firms that triggered its rules, Thames Water had seven “category 1” pollution incidents, which are the most serious, recorded in 2024. It also breached its licence to hold a sufficient credit rating and had a one-star rating in relation to its environmental performance. This meant that no bonuses or other awards were paid to its chief executive or its former finance chief, who left in March.

Wessex Water triggered Ofwat’s rule due to a criminal conviction for a sewage leak last year which killed more than 2,000 fish and resulted in a £500,000 fine. The company said it therefore decided not to pay any executive bonuses.

Ofwat also said it was planning to change the rules around water companies’ annual reporting so that they must publicly share details of pay received by directors from the regulated, group and parent firms.

Ofwat wrote in its report: “More broadly, while there has been some progress in certain areas on accountability, water companies must better demonstrate that they understand the feeling of public anger on bonuses and the expectation that they are accountable, and reflect this better in their decisions on executive remuneration.”