Institutional shareholders are also angry at the pounds 79,000 paid to Michael Payne, First Leisure's managing director, to extend his contract from one to three years, in direct conflict with corporate governance guidelines.
Institutions may seek to block the introduction of Mr Grade's new long term incentive plan. Several large shareholders are also threatening to vote against the re-election of three of the group's directors unless First Leisure comes up with satisfactory answers to their grievances. Joe Bollum, David Ducks and John Woolf, who all sit on the remuneration committee that agreed the payouts, could face opposition to their re-appointment at the group's AGM on March 17.
One fund manager said: "We are seeking clarification on the reason for these payments. This is far from over and the agm will be the focal point for concerns from shareholders."
Institutions have raised concerns over Lord Rayne and Robbie Rayne, the father and son team that sits on the remuneration committee. They are both directors and substantial shareholders of London Merchant Securities, the property group which was an original shareholder in First Leisure and which still has a major stake in the group. Another institutional shareholder said: "Their attitude to best corporate practice looks suspect."
Mr Grade's pay is pounds 510,000 a year, well in excess of the pounds 450,00 he earned as head of Channel 4. He is also entitled to a bonus for achieving a growth in the group's earnings per share and share price of just 2 per cent over and above the rate of inflation. The maximum payout under the scheme is pounds 625,000 a year if Mr Grade can achieve 6 per cent growth.
First Leisure tried to play down the extent of shareholders worries yesterday. Graham Coles, the group's finance director, said: "The institutions have not expressed any concerns to us. The performance criteria that Mr Grade has to meet are tougher than those of John Conlan [the group's former chief executive]."
First Leisure shares have underperformed the market by more than 30 per cent in the last 12 months.