Section 35B: Rules about remuneration and governance, Water Industry Act 1991

The Authority may issue rules about the arrangements made by relevant undertakers for—

the remuneration of their directors and other persons, and

their governance.

The Authority must exercise its power under subsection (1) to issue rules which achieve the following effects—

prohibiting a relevant undertaker from giving to persons holding senior roles performance-related pay in respect of any financial year in which the undertaker has failed to meet specified standards;

requiring a relevant undertaker—

to appoint persons to hold senior roles only if they meet specified standards as to fitness and propriety or in respect of other matters, and

to prevent persons from continuing to hold senior roles if they fail to meet such standards;

requiring a relevant undertaker to have arrangements in place for involving consumers in decisions of the undertaker that are likely to have a material impact on consumer matters.

Rules made for the purposes of imposing the prohibition mentioned in subsection (2)(a) ("the pay prohibition")—

must include standards that relate to—

consumer matters,

the environment,

the financial resilience of undertakers, and

the criminal liability of undertakers;

may include standards in relation to any other matters that the Authority considers appropriate;

may make provision designed to secure that performance-related pay that, if given by a relevant undertaker, would contravene the pay prohibition on the part of the undertaker, is not given by another person;

may provide that any provision of an agreement (whether made before or after the issuing of the rules) is void to the extent that it contravenes the pay prohibition;

may provide for a relevant undertaker to recover any payment made, or other property transferred, in breach of the pay prohibition.

For the purposes of subsection (2)(a)—

"performance-related pay" means any payment, consideration or other benefit (including pension benefit) the giving of which results from the meeting of any targets or performance standards on the part of the relevant undertaker or the person to whom such payment, consideration or benefit is given;

the reference to giving performance-related pay to a person holding a senior role includes—

giving such pay in respect of the person, and

giving such pay in respect of services provided by the person other than in that role.

A person holds a "senior role" with a relevant undertaker for the purposes of subsection (2)(a) and (b) if the person—

is a chief executive of the undertaker,

is a director of the undertaker, or

holds such other description of role with the undertaker as may be specified.

Rules made for the purposes of subsection (2)(c) may include a requirement for persons representing the views of consumers to be members of a board, committee or panel of a relevant undertaker.

If the Authority considers that a relevant undertaker is contravening the rules, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction.

It is the duty of a relevant undertaker to comply with a direction given under subsection (7), and this duty is enforceable by the Authority under section 18.

Rules under this section may—

make different provision for different relevant undertakers or descriptions of undertakers;

make different provision for different purposes;

make provision subject to exceptions.

The Authority may from time to time—

revise rules issued under this section, and

issue the revised rules.

Rules issued under this section (including as revised under subsection (10)) may apply to agreements made before the rules (or revised rules) come into effect.

Nothing in subsection (2) limits other kinds of provision about remuneration and governance arrangements that may be contained in rules issued under subsection (1).

In this section—

"chief executive", in relation to a relevant undertaker, means an employee of the undertaker who, alone or jointly with one or more others, is responsible under the immediate authority of the board of directors for the conduct of the whole of the business of the undertaker;
"specified" means specified in rules under this section.

Section 35B: Rules about remuneration and governance

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