UK water companies are under scrutiny in the news, being criticised for polluting our waterways and seas, while simultaneously paying their CEOs multi-million-pound remuneration packages and enriching investors.
The press reports that since privatisation in 1989, shareholders have received £72bn in dividends,1 meanwhile one-fifth of all our water supply is lost to leaks2, and last year there were approximately 800 sewage spills a day.3
The idea of a shareholder democracy behind privatisation has not become a reality, with only 3 of the 11 major UK water companies still listed on the London Stock Exchange. Instead, many water companies are now owned by foreign capital and private equity.
While as a UK resident you have the freedom to choose your energy or telcos provider, you cannot choose your water provider. As a result, water companies function as single suppliers (or monopoly providers), operating without the need to compete with other players in the market.
Are water company CEOs getting paid more than their peers?
To investigate this, we examined the 5 highest paid UK water company CEOs and compared their pay with the 5 top-earning CEOs from comparable, B2C, previously UK state-owned utility companies: SSE, Centrica, BT, E.ON UK and ScottishPower. Our analysis involved a direct comparison of 2022 CEO pay with company revenue, both in absolute terms and as a percentage of company revenue.
We found the highest paid water company CEO, Liv Garfield at Severn Trent, was paid £572,000 less than SEE CEO, Alistair Phillips-Davies, the highest paid CEO in the other comparable utilities companies. However, to put this in context, the revenue for SSE is 4.7 times higher than Severn Trent’s revenue.
Even if we compare Liv Garfield’s pay of £3.9 million to a closer figure of £3.5 million (the earnings of Centrica’s CEO, Chris O’Shea), Centrica’s revenues are 13 times higher than Severn Trent’s.
On the other end of the scale, if we look at the two lowest paid water company CEOs from our sample (Southern Water and Yorkshire Water), they received on average £168,000 more than the CEOs of ScottishPower and E.ON UK despite managing revenues nearly six times smaller.
Our findings show that although the selected water companies’ CEOs got paid on average c. £500,000 less than their peers at comparable utility companies, they got paid marginally more (c. 0.16%) when considering pay as a percentage of the revenue of the company.
These findings came as a surprise considering the UK water companies are monopoly providers and are allocated their customers based on their geographical location. The other utility providers must compete on the free market for customers, through business development, commerciality, marketing, ethical practice, and service delivery that considers the needs and desires of their customers.
So, are water company CEOs getting paid more than their peers? The answer is no, the 5 highest-paid UK water company CEOs receive less pay than their 5 highest-paid peers at other comparable utility companies in our sample.
However, we find it anomalous that water company CEO pay is on average only c. £500,000 less than CEO pay at the comparable utility companies, despite the companies they lead being;
- monopoly providers
- with considerably smaller revenues.
Some are calling for the water company CEOs pay to be based on environmental performance. Others are calling for renationalisation of the water companies. Welsh Water are pioneers in an alternative business model, running as a not-for-profit organisation since 2001.