Leading shareholders in WH Smith are plotting to remove its chairman, Richard Handover, who they blame for the company's poor performance.
At least two groups of institutional investors have raised the issue with WH Smith's financial adviser, Citigroup. They now plan to voice their concerns about Mr Handover with WH Smith's non-executive directors in the next few weeks.
Mr Handover, who joined WH Smith in 1964 as a shop assistant, served as chief executive for six years before becoming chairman in November, replacing Martin Taylor. Kate Swann, the former Argos boss, was appointed chief executive.
Earlier this month the company spooked the City by issuing a severe profits warning and announced the immediate departure of Beverley Hodson, head of UK retail.
One WH Smith shareholder said: "[Mr Handover's] position as chairman of the company is no longer tenable. He was chief executive during a period when the group was clearly mismanaged. We need the new chief executive to have a clear run at things. We need no one around with any baggage - no cause for conflict.
"We have already gone to stage one - approaching the advisers. We will move to stage two - the non-executives - very shortly."
Another leading shareholder said: "The argument about keeping him on to ensure continuity does not apply here. The company has lost its way so badly that there's very little to lose."
Shareholders, however, face a dilemma about which WH Smith non-executive director to approach. The senior non-executive director, Michael Orr, who has been on the board for 11 years, is due to step down at WH Smith's annual general meeting on 29 January.
WH Smith is in discussions with potential replacements. One fund manager said he would prefer to wait and approach a new member of the non-executive team, who should come to the company with fresh eyes.
Mr Handover is due to retire on 31 January 2005, but an early exit could throw up serious governance issues. The 57-year-old is paid £465,000, which is only £10,000 less than the chief executive's salary. If he was sacked before the end of his one-year contract then he would be eligible for a handsome payoff.
Shareholders are also expected to voice concerns about Ms Hodson's pay-off at the AGM.