Thames Water paid its finance chief a £1m signing-on fee in July as the company struggles with a mountain of debt and faces temporary nationalisation.
Steve Buck joined the company in April 2025 but it is understood the seven-figure payment was not made until last month after the company had taken legal advice over its contractual obligations.
The existence of the payment, first reported by Sky News,, external was revealed in a letter from the Thames Water chairman to MPs on the Commons Environment, Food and Rural Affairs Committee.
In the letter,, external Sir Adrian Montague said he understood customers would see large payments to senior leaders as "unjust" but argued they were necessary to stop staff leaving.
The letter said: "The majority of the team were brought in recently to fix the problems the company faces and are not responsible for causing those problems.
"These talented and experienced individuals have opportunities for roles outside Thames Water and, in many cases, have been actively approached by other companies.
"These roles would be less in the public gaze, less difficult and more remunerative."
Sir Adrian described the payment to Buck as a "necessary incentive" and said the money had come from emergency funding provided by Thames Water's lenders.
He said the company is facing recruitment and retention difficulties and warned the problem would "persist" if it was nationalised or put into special administration.
The utility company owes roughly £20bn and has been working with creditors and government officials to find a way forward.
Failure to reach a deal could lead to Thames Water being forced into a "special administration regime", a form of temporary nationalisation intended to keep the business operating until a viable solution can be found.
This would see government-appointed officials temporarily running the company – including funding its operations and upgrading infrastructure as well as dealing with any outstanding debts following a restructuring of the business.
If the company was subsequently sold to a private buyer, the government would be able to recoup some taxpayer cash.
Prime Minister Andy Burnham has previously said he would like to see "greater public control" of key water and energy utilities.
In the past year, Thames Water boss Chris Weston saw his pay increase 14% to £1.63m while other directors received bonuses totalling £4.1m.