The Water (Special Measures) Act 2025 was enacted on 24 February 2025, introducing a statutory framework designed to hold water companies and their directors accountable for governance and executive compensation, based on regulations set by Ofwat.
The Act requires Ofwat to create further rules concerning the governance and pay of water company directors, which include:
- Performance-related pay – The new regulations will prohibit the payment of performance-based bonuses to directors and CEOs for any financial year in which their company does not meet certain standards related to consumer issues, environmental performance, financial stability, and criminal accountability.
- New fit and proper tests – Ofwat will define 'fitness and propriety' criteria that directors and CEOs must meet in order to be appointed or continue in their roles.
- Consumer participation in corporate decisions – Companies will be required to implement processes that involve consumers in decisions that could have a significant impact on their interests.
Additionally, Ofwat has the authority to extend the rules concerning performance-related pay and fitness and propriety to senior roles below the board level within water companies.
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