Scandal of the filthy rich water bosses

The privatised water companies have pushed through a pounds 20m pay and perks package for their directors while becoming the worst group of persistent polluters in the country, new figures reveal.

Two surveys show that while the bosses are well on the way to millionaire status they are failing to stop their firms, privatised seven years ago, from despoiling the environment.

According to a survey by the Labour Party of directors' total benefit packages, 12 executive directors in the 10 large water service companies (which deal with sewage as well as supplying water) last year received packages in pay, bonuses, pension contributions and share options worth more than half a million pounds.

A second survey, by the Independent on Sunday, shows that the 10 companies have between them racked up a total of 237 criminal convictions for pollution since privatisation in 1989.

According to Labour's figures, one water company director, William Courtney, chairman of Southern Water, has a package which could net him more than pounds 1m. Sir Desmond Pitcher, chairman of United Utilities, which covers the north-west, could get pounds 954,905. The average package of the 43 executive directors, according to Labour's figures, was worth pounds 432,821.

Yorkshire Water's new chairman, Brandon Gough, was paid pounds 2,000 for one week's work as a non-executive director of the company.

But the companies they run show no sign of improving their records on pollution. Last year alone, they were responsible for 48 significant pollution incidents, resulting in criminal charges.

Birmingham-based Severn Trent, fined pounds 175,000 only last week for killing 33,000 salmon in the River Wye, is the worst offender, with a criminal pollution record of 40 offences. The former Welsh Water, now Hyder, is second worst with 33 offences and North West Water, now part of United Utilities, is third with 31 convictions since 1989.

The surveys reveal that the millionaire Mr Courtney, whose principal recreation is sailing, presides over a company which two months ago was fined pounds 8,000 for polluting with sewage sludge the estuary of the River Itchen, where it flows into Britain's premier sailing venue, the Solent, and for polluting the model boating lake on Southampton Common.

Ed Gallagher, chief executive of the Environment Agency and Britain's top pollution regulator, yesterday laid the blame for the incidents directly on poor management by the companies. "Environmental protection depends on prevention and high operating standards," he said. "Prosecutions against water companies at the rate of two to three a month since privatisation clearly reveal that management has yet to grasp that fact."

Frank Dobson, Labour's environment spokesman, denounced the directors themselves. "They have become the Arthur Daleys of the environment, operating in a dodgy never-never world and that is not the way it should be," he said. "These are companies who are supposed to comply with the law. They are not supposed to be performing in a way which leads to prosecution."

Yesterday Labour added to the criticism when Gordon Brown, the Shadow Chancellor, revealed that the big water firms had set up offshore subsidiaries in tax havens. They include several in the Isle of Man, including Isle Insurance Company, run by Thames Water; St Mellons Insurance, run by Welsh Water (now Hyder); and Ridings Insurance Company, run by Yorkshire Water.

"It is now time for a full Treasury inquiry into the unfair and privileged tax position of Britain's hugely profitable water companies, many of whom have still paid no tax years after privatisation," Mr Brown said.

Labour's figures - which cover the notional value of incentive plans based on this year's earnings, as well as pay, pension contributions and bonuses - are likely to re-ignite the public anger over boardroom excess.

Executive share option schemes, which were criticised by the Greenbury committee, have been phased out. Long and short-term incentive plans of the sort received by the water bosses have replaced them.

These usually pay directors in shares, held in trust for a period of time. The directors have to meet performance criteria if they are to cash in.

However, Labour's study points out, such criteria may cover the company's shareholder dividends but not levels of customer service. "The remuneration committee can lower the amount to be awarded if they think levels of service to customers have been poor," says the study, "but they are under no fixed formula to do so."

Usually directors holding long-term incentive plans will receive the purchase value when they sell their shares, plus any increase in it resulting from a share price rise and dividends accrued throughout the two-year trust period.

Mr Dobson said yesterday: "After the public revulsion at the earlier pay scandals, the response of the water companies is to come up with an even bigger scandal. It is pure greed undiluted by any consideration for the customers or the environment. We will be hounding the Tories over the failures of the water industry."