Let’s talk about the absurdity of modern corporate loopholes. Here we are, in 2026, watching water company executives in the UK get paid handsomely while their sewage systems overflow and their environmental records crumble. The government tried to rein in bonuses for these underperforming monopolies, only to watch them pivot to other forms of compensation. It’s not just a regulatory failure—it’s a masterclass in human ingenuity applied to self-interest. What makes this particularly fascinating is how it mirrors the same patterns we saw in the banking sector after 2008, where bonuses were capped, only for salaries to balloon under the guise of 'role-based allowances.' The lesson? When you try to control one aspect of compensation, another will inevitably rise to fill the void.
The Labour government’s 2024 pledge to ban bonuses for ‘polluting’ water bosses was a noble attempt to align executive pay with environmental accountability. But the flaw in their strategy was glaring: they focused on bonuses, not total compensation. As I’ve argued before, banning one form of payment while leaving others untouched is like trying to stop a leak with a bandage. The Water (Special Measures) Act of 2025 gave Ofwat the power to block performance-related bonuses for the worst offenders, but it left salary increases, retention payments, and allowance awards wide open. And guess what? The water companies didn’t miss a beat. Last year, CEO and CFO pay packets rose by 1.5% to £25.3m—a second consecutive year of increased compensation despite the bonus ban. This isn’t just a numbers game; it’s a psychological one. Executives don’t want risk; they want certainty. A guaranteed salary increase, even if it’s smaller than a potential bonus, feels safer, and that’s exactly what these companies exploited.
Take Thames Water, for instance. Their CFO, Steve Buck, received a delayed £1m signing fee after already being paid £591,000 in the previous fiscal year. Meanwhile, the company claims to have ‘resolved its liability’ for retention payments through 14 new agreements. What’s striking here is the sheer audacity of it all. These executives aren’t just getting paid—they’re being rewarded for delaying accountability. The government’s outrage is performative; they knew this would happen. Politicians love to pass laws that sound tough but ignore the reality of human behavior. If they truly believed that banning bonuses would curb excessive pay, they were either naive or cynically indifferent. The truth is, they left the door open by not addressing the entire compensation structure. Ofwat can only do what Parliament allows, and Parliament didn’t have the foresight to close all loopholes.
But let’s step back. This isn’t just about water companies—it’s about the broader culture of corporate compensation. When we talk about ‘performance-related pay,’ we often assume it’s tied to measurable outcomes. Yet here, performance is defined by sewage spills, environmental fines, and public distrust. The irony is that these executives are being paid to fix problems they helped create. What many people don’t realize is that remuneration committees are experts at gaming the system. They’ll call a retention payment a ‘retention payment,’ a salary increase a ‘salary increase,’ and a signing fee a ‘signing fee.’ The language is precise, but the intent is muddled. Helen Campbell of Ofwat rightly pointed out that customers’ trust erodes when these decisions lack transparency. Yet transparency is the last thing these companies prioritize. They’d rather keep their accounting jargon opaque and their paychecks fat.
So where do we go from here? The regulator’s autumn review might lead to stricter rules, but history suggests incrementalism. The prime minister’s vague promise of ‘greater public control’ is a placeholder for real change. In my opinion, the only way to break this cycle is to decouple executive pay from company performance entirely—or at least redefine what ‘performance’ means. If we want to hold these companies accountable, we need to stop letting them define success as avoiding penalties rather than achieving environmental goals. The real question is whether the public will tolerate this charade forever. I suspect not, but until there’s political will to overhaul the entire compensation framework, we’ll keep watching executives get richer while the rest of us deal with the mess.
What this really suggests is that regulation without systemic thinking is a futile exercise. You can’t ban bonuses without banning all forms of excessive pay. You can’t punish bad behavior without rewarding good behavior. And you can’t expect executives to act in the public interest when their incentives are aligned with self-preservation. The water crisis isn’t just about sewage—it’s about power, accountability, and the relentless human drive to find loopholes. If we don’t start thinking differently, we’ll keep repeating the same mistakes, one bonus ban at a time.
