As the famous ad goes, ‘It’s because I’m worth it’, and the executives at
Network Rail certainly think they are. As Ron Henderson, Network Rail’s group
finance director, picked up his bumper £180,000 bonus last week, chairman Ian
McAllister was happily telling the beleaguered travelling British public that,
if anything, his executives are paid far too little.
Henderson, group finance director since the infrastructure rail operator’s
creation in October 2002, will now pick up a whopping £611,000, yet 2004/05 will
be the first year the body has made an operating profit.
Despite chairman McAllister’s claim that his executives’ salaries aren’t
excessive, Henderson’s remuneration package now rivals that of any FTSE100 FD,
and has increased by £128,000 this year. His £323,000 base salary compares
favourably with that of David Bennett of Alliance and Leicester and tops that of
John Rishton at British Airways.
But it’s Henderson’s bonus that has raised more than a few eyebrows. The
former chief executive of failed tube consortium TubeRail has picked up £180,000
in a performance bonus, plus £20,000 in benefits and £91,000 in pension
McAllister argues that his team has begun to turn around a ‘pretty disastrous
situation’, with Henderson getting its finances on an even keel by turning an
operating loss of £758m into an operating profit of £407m in 12 months.
Henderson has also hit all his performance targets, including overall
business objectives of reducing train delays, financial efficiency and managing
the body’s assets.
And the board claims that its executives are only being paid in line with
their equivalent colleagues in FTSE350 companies.
This is part of the controversy. Network Rail is not a FTSE350 company, it is
a complex, not-for-profit organisation that manages the UK’s rail
infrastructure. It has no shareholders and relies on money from taxpayers and
rail passengers to operate and, like the BBC, is publicly accountable.
At Network Rail’s annual general meeting last week Henderson and his fellow
executives were urged to forego 50% of their bonus as a gesture of goodwill and
as an acknowledgement that one in five trains still run late.
The motion failed, despite an increase in the body’s net debt and problems
over maintenance, and Henderson’s total package is now more than Margaret Ewing
at BAA and Timothy Scott at ICI.
But Henderson, 59, is a rail veteran and will undoubtedly sail through the
He is a former FD at BICC and stayed when it became Balfour Beatty in the
1990s. He has also worked for Halliburton, Brown and Root and Arthur Andersen
and is renowned for his tight grip on finances.
Over the coming months, Henderson’s role, and that of his fellow executives,
may widen as Network Rail takes on yet more responsibilities for route planning
and industry performance as the Strategic Rail Authority is wound down. This
could well be the test as to whether
Henderson is really worth it.
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