An investor revolt could be building at United Utilities after a shareholder advisory group urged investors to vote against a new pay policy that would hand the company’s top executives hundreds of thousands of pounds in additional fixed remuneration.

Institutional Shareholder Services has recommended shareholders reject the proposals at United Utilities’ annual meeting on 17 July, warning that the changes would “substantially increase guaranteed remuneration” and reduce the link between pay and performance.

The company wants to award chief executive Louise Beardmore an annual allowance worth £435,000 in shares and finance chief Phil Aspin an allowance of £280,000.

ISS said the new payments would increase “the certainty and quantum of pay”, concerns that were heightened by the 20% salary increases already awarded to both executives last year. Beardmore’s base salary rose to £870,000, while Aspin’s increased to £560,000.

The proposed allowances have become the central point of contention among investors because they would provide a significant element of fixed pay regardless of future company performance.

United Utilities argues the changes are needed to retain senior executives and to provide greater certainty over remuneration following recent regulatory changes affecting bonus schemes. The company is also proposing to reduce the maximum annual bonus opportunity for executives to 100% of salary from 130%, and to cut the maximum long-term share award opportunity to 175% of salary from 200%.

Even with those reductions, ISS estimates the revised structure could allow Beardmore to receive a package worth up to £4.6 million in 2026-27 if maximum bonuses and share awards are achieved and the company’s share price rises by 50%.

Another shareholder advisory group, Glass Lewis, has recommended that shareholders support the remuneration policy, although it acknowledged there were “legitimate concerns” about the context in which the allowances are being introduced.

The dispute comes at a sensitive time for the water industry, which has faced intense scrutiny over executive pay and environmental performance. Last year, Ofwat used new powers to block bonuses for executives at six water companies, including Beardmore and Aspin, after an incident involving the release – and death – of thousands of fish during testing of a reservoir valve.

In April, Ofwat warned water companies against attempting to “circumvent” its bonus rules through increases in fixed pay and said it would take action where companies breached its requirements. United Utilities said it would continue engaging with shareholders ahead of the vote to explain the rationale for the proposed policy.

Beardmore has faced scrutiny over her pay in relation to the company’s environmental failings in the past. In February last year she conceded to MPs on the Commons environment, food and rural affairs committee that “our performance isn’t good enough … we have one of the highest rates of internal sewer flooding across the country”.

United Utilities serves customers in the north-west of England. It was created during the 1989 privatisation of the water industry, which included the stock market listing of North West Water, which was renamed United Utilities after it merged with the electricity supplier Norweb in 1995, although the group no longer supplies electricity.

 

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