Double standards
THERE is a growing dichotomy with regard to British Waterways directors salaries. The directors consider themselves to be underpaid and reinforce this claim with a consultants report which suggests that they are underpaid by about 15% per year.
The reason for this shortfall is that they have no long term incentive plan. They have spent the last year planning to introduce one!
On the other hand there is the rest of us who accuse British Waterways directors of being 'fat cats' with 'noses in the trough' (which suggests pigs rather than cats!) or 'riding the gravy train'. We are not alone! The man who will probably be the next prime minister, David Cameron, in a speech at the Conservative Spring Party Conference named five public sector workers he claimed were getting rich at the public's expense. Four of those named were BW directors...
The dichotomy grows
The dichotomy has grown wider recently with the chair of BW's Remuneration Committee attempting to justify directors being underpaid by comparison to the private sector using such meaningless terms such as 'basket of comparators'. However, at the same time as Mrs Carver was comparing directors salaries to those in the private sector, BW was finalising plans to turn itself into a third sector organisation similar to The National Trust.
National Trust v British Waterways
So how does BW stack up against NT with regard to salaries for the top people? To make comparison fair, it must be stressed that NT has a far larger income—almost £400m against BW's £220m (2007/8). Also, NT has to earn all this income—BW is simply given a third of its income by the government.
NT's governance staff costs for 2007/8 were just £1,003,000. BW's were £1,932,000.
Put another way, the National Trust is about twice as large as British Waterways in terms of income. It manages to generate three times BW's income itself (i.e. excluding government grant) but its equivalent of BW's directors salary bill is half.
In 2007/8, Robin Evans BW's chief executive, was paid £284,000 despite a dramatic drop in boaters customer satisfaction and BW's joint ventures producing a loss. His opposite number in NT was paid about £175,000. In the same year BW's part time chairman, Tony Hales, was paid about £49,000—his NT opposite number provided services free.
Somebody had to ask!
During BW's last financial year it has acknowledged the need to cut costs, particularly staff salary costs. It has also felt the need to replace its failed 2012 vision (whereby it would become 'self sufficient' and double its number of visitors) with a 2020 vision which would turn it into a charity or trust.
Bearing in mind that BW could save at least £1m per year in adopting a governance remuneration scheme similar to the National Trust it was asked to provide: "Outline details of any scheme or plan to bring executive and board directors salaries into line with the 'third sector' (in particular the National Trust)."
Sadly, the response indicated that no such plans existed.
Double standards
Does British Waterways operate double standards? Whilst it is making staff below director level redundant to reduce salary costs, it is unwilling to align its directors remuneration with the third sector. Examination of remuneration committee minutes for December 2008 and April 2009 suggest that its plans to increase directors salaries by 15% are still being actively discussed. Furthermore, the remuneration committee feels that it is appropriate to pay directors bonus of up to 30% of basic salary (40% for the chief executive) for 2009/10.
Is British Waterways serious?
It would appear that British Waterways wish to 'go third sector' in all but its directors remuneration. Examination of the 2008/9 Annual Report suggests that most non-executive directors will retire before 2020 on large pensions. If BW's aspirations are to be taken seriously then it must produce a plan whereby directors remuneration is aligned to the 'third sector' rather than the 'private sector'.