Should we give bonuses to executives who underperform, abandon passengers and incur a £14m fine? asks Michael Stephenson

Found wanting by the public, censured by the select committee and damned by their own members in a report that they tried to suppress – do Network Rail‘s managers really deserve to receive another trolley full of cash this year?

Rewards for failure are the flavour of the month at the moment. One thing the current financial crisis has taught us is that the way in which bonuses are structured can have a tremendous effect on the culture and performance of an organisation. Make them short term and in cash, and you get the risk-taking culture that brought our banking system to its knees. Alternatively if the targets are made too easy, you get a culture of complacency where minor managerial success is treated as if those in charge can walk on water.

It is very easy to argue that Network Rail fits the bill for the second category. While Network Rail has performed better than Railtrack before it, it is still a long way from the service the public deserves.

Last year the Co-operative Party published new research identifying – and setting out remedies for – systemic weaknesses in Network Rail that have repeatedly and unnecessarily caused chaos to the travelling public – showing how it is failing both passengers and the wider rail industry. Evidence compiled by PricewaterhouseCoopers in a report that Network Rail tried to suppress confirmed this view. A typical stakeholder view cited was that Network Rail “did a very good job in the beginning but they have failed to move from those sort of battle conditions they were in, to a much more forward-looking customer focused horizon”.

A key concern is Network Rail’s lack of operational efficiency. Even taking into account the historic under-investment in Britain’s railways, Network Rail underperforms against the European average by £846m per year for renewal and £263m for maintenance, which works out as approximately 19% of turnover.

There is also insufficient regard for passengers. Last month’s simultaneous closure of both the east and west coast mainlines on successive weekends being a classic example of how little rail users register in the thoughts of Network Rail’s management.

In 2008, after leaving thousands stranded in the new year and receiving an unprecedented fine of £14m from the regulator, Network Rail’s executive management was congratulated by its board for “a good year for their staff and the public”. Rewards flowed to their most senior employees; with their three executive directors each receiving performance related bonuses in excess of £350,000. It highlighted the clear lack of accountability to passengers and the public: as thetransport select committee stated last year, “if Network Rail’s members cannot, or will not challenge and block such a move, they are not a body worth having”.

This year we again face the prospect of another colossal pay-out for mediocre performance, and we risk another next year and the year after next. Long-suffering rail users deserve better than a network run for the convenience of managers, and the bonuses reflect a deeper problem: the flawed structure of Network Rail. The only way in which we can break this cycle is through a fundamental restructure of the organisation to make it a real mutual. Only that will secure the accountability needed to incentivise Network Rail to give the public the quality of service they deserve.

This article first appeared on the Guardian’s Comment is Free