Northumbrian Water increased the bonus for its boss by 65% even though it was rated among the six worst water companies by regulator Ofwat.
Heidi Mottram was paid a £215,000 bonus, up from £130,000 the year prior, accounts show, despite the company being rated by the regulator as lagging behind on its performance targets.
Northumbrian, which supplies the northeast of England, Suffolk and Essex, missed targets on water quality, leakages and sewage overflows, hitting just five of 12 performance criteria.
The company recently also had to deny it was responsible for an outbreak of sickness and diarrhoea at the World Triathlon Championship Series in Sunderland where 57 competitors fell ill after off-the-scale readings of e-coli in the water.
Northumbrian said it had not recorded any discharges that might have affected water at Roker Beach since October 2021.
Sewage dumping has become a major scandal in recent years, forcing UK water companies to apologise for spills into rivers and the seaside and promise to more than triple current levels of investment to £10 billion for sewer improvements.
Companies have been allowed by the government to dump sewage during periods of heavy rainfall to avoid storm drains being clogged, though swimmers and other lobby groups allege the utilities are abusing this power.
According to the Sunday Times, as well as Mottram's higher bonus, Northumbrian paid out £159 million in shareholder dividends in 2022 despite a £50 million loss.
Mottram met targets set by Northumbrian’s owners, US private equity company KKR and Hong Kong billionaire Li Ka-shing, said the report.
In total, Mortam received £781,000 remuneration last year with the bonus.