Network Rail AGM sets out progress

and members approve incentive scheme

to deliver better value railway for Britain

Published 18 July 2013



Courtesy Network Rail



Passengers using the new Western Concourse at




Thursday 18 July 2013


Network Rail's 11th Annual General Meeting has taken place today in Cardiff,

at which Chief Executive, David Higgins, set out the progress made by the company

in improving Britain's railways over the past year.


Highlights include:


Passenger satisfaction reached a record high – 85%

Passenger numbers reached 1.5bn for the first time since the 1920s

95% of passengers felt that rail travel during the Olympics had exceeded or met their expectations

£4.4bn worth of work on almost 2,000 projects aimed at improving and expanding the railway was completed

More than 200 bridges were renewed and rebuilt

940 miles of track was replaced

Almost 91% of trains for the 12 months ran to time – the third best year on record although below the regulatory target

Britain was recognised by the European Commission as the EU's most improved railway over the last 15 years



A Growing Railway

EUSTON Station





Also on the agenda were proposals for a new long-term incentive scheme for Network Rail executive directors,

which would recognise outstanding and exceptional performance in building a bigger, better value railway.


The proposal was approved by 86% of Network Rail's members* – the company's equivalent to shareholders

whose job is to hold the board to account.


It was one of 22 resolutions put before them for approval at today's meeting.

The new scheme recognises outstanding and exceptional performance over the three years to 2015,

with any future awards measured against train performance, savings made for the taxpayer

and the successful delivery of congestion easing projects.

The scheme was informed by discussions with members at a series of meetings and workshops.

Network Rail is required to have a long-term incentive scheme in place as a regulatory licence condition

and the Office of Rail Regulation has confirmed that it meets those conditions.


Network Rail chairman, Richard Parry-Jones, said:


“Network Rail has had another solid year of progress and we intend to continue on this path.


"As our annual bonus announcement earlier this year clearly demonstrated,

Network Rail senior executives are rewarded only

when exceptional performance exceeds tough targets

which have been approved by our members through an open and transparent process.


"If targets are not met, or safety compromised, no bonuses are paid.

“Discussions with our members and stakeholders and feedback from customers

highlight their concerns about the cost of operating Britain's railways and the cost of fares.


"These rank as highly in their minds as the punctuality of the train service.


"The proposed new long-term incentive scheme addressed these concerns,

with a focus on safely bringing down the cost of the railway while building capacity for the future.”












Signalling Work Station






* About Network Rail's members

Members perform a similar role to institutional investors in a listed public limited company,

except, as a company limited by guarantee, members do not have any financial interest in the company.

As at 18 July 2013, the company had 44 members.


Further details including biographies of current members and information on how to become a member can be found here

Members are recruited on an annual basis and are currently appointed for a three-year term.







Network Rail's high output Track Renewal System 4 in action on the West Coast.

It was designed specifically for this line and its tight gauge clearance.






About the long-term incentive plan (LTIP) proposal

The long-term incentive plan sets out a framework against which performance will be measured.

It uses the following performance measures:

Taxpayer savings (50% of total)

Measured by Financial Value Added (FVA) – A positive FVA means that Network Rail has been able to deliver sustainably

the outputs as required by the ORR with less money than was made available to the company.

A positive FVA therefore reflects direct savings to the taxpayer.

“Operating today” - Train performance (25% of total)

Measured by public performance measure (PPM), the standard process by which passenger and freight train punctuality is measured.

The PPM moving annual average (MAA) for the year to 22 June 2013 is 91.0%.

“Operating tomorrow” - Capital projects (25% of total)

Measured by successful completion of agreed milestones on projects to deliver a bigger, better railway.

Under the scheme, payouts would commence at 25% of annual salary

if performance was deemed to have exceeded expectations using the above measures.


% of max

Cumulative FVA

PPM MAA as of 31 March 2015


50% of award

25% of award

25% of award

Performance above expectations




“Delivery above expectations”

Exceptional performance


£450m or above

93.0% or above

“Exceptional delivery”



If exceptional performance is achieved – that is, if Network Rail delivers savings to the taxpayer of at least £450m,

raises train punctuality to the highest levels ever seen in this country

while delivering a massive programme of capacity-boosting projects ahead of time and under budget

– then the hypothetical maximum payout for the company's executive directors would be just over £2m in total.


However, as this year has demonstrated, there is no reward for failing to meet targets and underperformance

in any one or more element will result in lower payments.

The view of the remuneration committee is that the scheme represents good value for Network Rail's stakeholders

and provides the right balance between reward and outperformance.


For example, the performance target of 92.5% – which is the minimum required to trigger any payout

under the train performance element of the LTIP scheme – is equal to the performance target set by the ORR

in its recent draft determination for control period 5 (2014-19).


Current salary

2012-15 LTIP award (maximum)

Maximum potential payout

(in April 2015)

David Higgins




Patrick Butcher




Robin Gisby




Simon Kirby




Paul Plummer







About Network Rail incentive schemes

The long-term incentive plan is designed to compliment Network Rail's annual incentive plan.

Together, the two elements form the company's management incentive plan

which is designed to drive and reward exceptional and outstanding performance.

The annual incentive plan currently offers up to 60% of annual salary if stretch targets are met

(reduced by 40% from a previous maximum of 100% of salary two years ago).


This year's payout was 17% of salary, which reflected some targets being met (such as passenger and train operator satisfaction)

and others not (such as train punctuality).


A 10% reduction was made at the discretion of the remuneration committee

to reflect concerns around workforce safety.





Media Relations (National)

Telephone 020 3356 8700



Return to Top of Page

Return to RVR Home Page