"The Prime Minister will be deeply disappointed"

So.

According to the Number 10 spokeswoman in the Lobby today "The Prime Minister will be deeply disappointed" by the decision of Network Rail's Members to rubber stamp director bonuses.

Indeed.

But what are we to make of this from Network Rail's press release on today's disappointing proceedings:

Network Rail today held its annual general meeting in Manchester attended by 59 of its 100 members... with 77 members voting.

So 41 Members of Network Rail couldn't be bothered to attend the company's Annual Meeting.

Clearly they know the game is up.

Whilst 23 couldn't even be arsed to vote at all!

What a testament to Network Rail's fabulous corporate governance.

So what difference did these 23 abstentions make?

Only 54% (of the 77 who did bother to vote) approved the Directors' Remuneration Report as set out on pages 30 to 49 of the Company’s Accounts for the year ended 31 March 2010

Oh shame on those Members that abstained - you know who you are.

What earthly value are you to man or beast?

The abolition of the rightly named 'Members' cannot come soon enough!

Come on Phil, put them out of our misery and that right soon.

UPDATE: This from the Gruaniad...

There were 37 votes in favour of the pay report, 31 against and nine active abstentions including the Department for Transport's single vote.

A 'mixed' performance from Network Rail...

Telegrammed by Bulldog Drummond
It started with a lacklustre performance by Iain Coucher on the Today programme at 07:20.

The Network Rail chief exec seemed to allege that ORR were using the 'wrong kind of efficiency measures'.

Then there was the ORR press conference, well described by Nigel Harris on his blog, called to discuss the Regulator's robust and pointed letter on Network Rail's performance last year.

Another self-serving piece of work was Network Rail's Preliminary Financial Results for the year ending 31 Mar 2010.

Although not easy to read the story is depressing.

There is some improvement but it is being bought at too high a price and taking too long and, anyway, ORR is clearly not convinced that many of Network Rail's claims add up.

It is instructive that Coucher only mentions six new projects in the Preliminary Financial Results:

• Airdrie to Bathgate – a new line being built in Scotland, scheduled to open in December 2010
• The programme of work for the London 2012 Olympics continues; this includes new lines, new stations, better facilities and new rolling stock on the North London Line and East London Line in addition to works to support and enable the transport links being developed in the Stratford area
• Construction is well advanced on the Thameslink programme
• Also as part of the transport strategy for London, the Reading project has advanced, as well as key development work now underway for Crossrail
• The Birmingham Gateway project to redevelop New Street has attracted a significant amount of third party investment

Yet half of these are being driven by others.

Rolling stock procurement is nothing to do with Network Rail.

Property investment should not be the main focus of our national infrastructure company.

Highlighting Newport station as a major initiative seems to indicate so little is being achieved that a £22m project, which is partially funded by the Welsh Assembly, gets top billing.

Meanwhile signalling problems on the North London Line and ORR's intervention into Airdrie Bathgate appear to have been glossed over.

The fantasy that Network Rail is a sound and effective business is best left to the words of the hapless Group Finance Director, Patrick Butcher:

"Network Rail is maturing into a company that is strong and sustainable."

Does anyone in their right mind really think this is the case?

He tops this Pooterish statement with the complete nonsense that:

"Our financial performance means we generated operational cash flows 80% greater than required to pay our net financing costs. Our gearing ratio [debt to regulatory asset base] of 64% shows that our debt is at a sustainable level and gives the business a significant buffer to absorb unplanned costs."

This is the world of Micky Mouse accounting.

Interest on debt can only be paid out of net income, not total cashflow.

The RAB is a completely meaningless basis for borrowing, particularly if sufficient income cannot be generated to pay interest and start to reduce the principal outstanding.

The reality is that Network Rail is slipping into a morass of debt and that too little is being bought for the huge sums being borrowed.

The Prudential affair has shown that corporate activism is now much in vogue.

Eye is certain that the Members of Network Rail will make it their primary business to stop this corporate muddle at their AGM next month and direct the Board as to how the business is to be run in future.

Network Rail Public Members jolly

*** Tunnel Vision's take on NR's awayday for Public Members***

We're in the money!

***NR bosses have seen off a challenge to change the company's controversial bonus scheme***

NR Director's bonuses

Just a quick reminder to those Public Members on their way to Network Rail's Annual Meeting today.

Just say no.

Network Rail guilty of Water Boarding!

Drip, drip, drip - the sound of confidence draining away.

This from Nigel Hawkins over at AdamSmith.org...

Efficiency levels within Network Rail remain unimpressive and its governance regime resembles that of the 1960s water boards.

Restoring confidence in NRs dire corporate governance will be the first job of Rick Haythornthwaite, when he becomes Chairman in July.

Insiders expect board meetings to be stormy!

Network Rail Public Membership

Applications to join NR's 'Stepford Wives' closed on the 12th June.

The Membership Selection Panel (MSP) hopes to write in the week commencing 27 July 2009 to inform applicants whether or not they have been invited to the Candidate Workshops.

Our man at 222 Marylebone Road, the Independent Expert, Dreadnought, Leo Pink, The Major, etc... all await the call with anticipation.

Unsurprisingly none have rushed to clear their diaries yet...

Zimbabwe election

Good news for fans of corporate governance.

This from the national infrastructure owner....

Network Rail today announced its new designate chairman, Rick Haythornthwaite.

His appointment will be made by the Board following a meeting with Network Rail’s Members with the matter being put before the company's AGM in July as a normal election resolution.

Rubber stamps and trebles all round !

Curse of Capt Deltic

Bad news for wheel barrow manufacturers.

According to today's Times the Tories will give the ORR powers to veto or amend NR Directors' bonuses following "serious failure".

The Tories also plan to get shot of the majority of Public Interest Members - who have proven completely useless at holding the company to account.

Railway Eye readers will recollect the national fury that greeted the announcement earlier this year that NR's three executive directors would trouser £1.2m in bonuses between them; this despite the company being fined a record £14m by ORR for Christmastide engineering overruns.

The new scrutiny body will number 20 (down from 106) and will have additional powers to hold NR to account.

The Fact Compiler is confused. If Network Rail is a private company then surely the Tories cannot change the company's corporate governance, unless they nationalise it first. If they don't need to nationalise it, then it must already be under state control, in which case it can't be a private company.

Priorities

Good to see that Network Rail can read the runes.

NR treated Tory grandees to dinner last night, whilst the Smelly Socks were only offered drinkies in Manchester.

Penny wise NR didn't even do their own thing last week, preferring to share the costs of cheap plonk and curly sandwiches with ATOC!

But will last night's schmoozing be enough to stop the Tories unpicking NR's bloated empire?

Sloppy work by KPMG

Telegrammed by our man at 222 Marylebone Road
Railway Eye readers have already noted that KPMG appear unsure what infrastructure NR is actually responsible for (see post below).

Further inconsistencies have emerged.

In the executive summary of its review of Network Rail governance, the consultants list:

Possible options for further exploration regarding organisation of members.

These include:

• increasing the number of members;

• reducing the number of members;

How could they have missed the third option - Keeping the same number of members?

Who says accountancy is all about detail?

(Note to ORR. This advice has cost you £75,000 at the standard hourly billable rate for Railway Eye Consultants)

Sleeping partner

Negligent discharge

Regular readers of Railway Eye will be aware that Captain Deltic has offered his services to Network Rail, as a Public Member, on more than one occasion.

They will also be aware that for the third time this selfless and gracious offer has been declined.

Those who know the good Captain had assumed he had taken this set-back with his customary sang-froid and that even now he is steeling himself to respond once more to the nations call, should Network Rail allow.

Alas! Great sadness and shocking news!

It would appear that Saturday's rejection has had more than a passing effect upon that English Electric heart of gold, if a recent thread on Tom Harris' blog is to be believed.

As a service to the industry the Fact Compiler reproduces the disturbing exchange below:

Captain Deltic
August 8, 2008 at 1:05 pm

His spin doctor should have pointed out that if you really want to look credible with an AK47 you should have a spare magazine gaffa taped to the one in use. and the version with the folding tubular stock is even more warry.

So not impressed. What’s your weapon of choice?

Tom Harris
August 8, 2008 at 1:21 pm

You’re a strange and disturbing man, Captain

The Fact Compiler fears that the good Captain may be preparing his very own unique route-and-branch reformation of NR's corporate governance!

Read all about it

Telegrammed by our man at 222 Marylebone Road
Today the ORR published the report it commissioned into aspects of Network Rail’s governance.

Entitled "Network Rail: Membership aspects of governance", the KPMG report drew attention to a number of serious structural weaknesses in the role of Public Members including:

• a lack of clarity about the role of members and the way members are selected

• issues around members having access to appropriate information and analysis in order to take an informed view of Network Rail's performance, including future prospects, so that they can hold Network Rail to account efficiently.

Perhaps the simplest solution would to be to give all Public Members a wi-fi enabled laptop set to the Daft endorsed uber-rail web-site Railway Eye!.

That really would challenge Ian McAllister's legendary schmoozing powers.

Little piggies

The Tories have also put the boot into Network Rail following the publication of today's TSC report.

Theresa Villiers, the eminently forgettable Shadow Secretary of State for Transport said:

"This report confirms the points the Conservatives have been making for years - that Network Rail is not accountable to its customers.

Handing out fines of millions of pounds which the taxpayer picks up is pointless when the senior management at Network Rail can collect six figure bonuses in a year which saw them preside over the fiasco at Rugby, Liverpool Street and Glasgow."

Wise words indeed.

However, Coucher and co have no need to panic yet. Whilst everyone else is talking about reform to NR corporate governance DafT remains to be convinced.

And as long as NR continues the pretence of being a 'private company', whilst acting under Marsham Street direction, then next year's refill of the bonus trough is assured.

In the land of the blind

***Those who applied to become Network Rail public members should now know whether they have succeeded in getting through to the next stage of the process.***