Investors to vote against EMI bosses in pay row

EMI, the UK music giant, is facing an investor showdown over pay that could lead to its two most senior directors being forced off the board.

The National Association of Pension Funds, which represents funds with £650bn of assets, is recommending that its members vote against the re-election of Alain Levy, the head of the recorded music division, and Roger Faxon, the finance director. The vote will come at the company's AGM on 19 July.

The NAPF rarely pushes for an "against" vote; it would normally recommend abstention. If the directors were not re-elected, they would have to stand down and would be likely to resign.

EMI's annual report reveals that the two directors would receive one year's full pay on termination of their contract – but double that if the company was taken over.

This would mean Mr Levy receiving around £3m and Mr Faxon £1.2m. Yet a take- over could occur whether EMI has performed well or not.

"We think it's wrong that directors should potentially get higher rewards related to a possible change of control," said a NAPF spokesperson. "Very often the reason for a change of control is because the company is weak. It seems wrong that directors should get more [compensation]."

There has been speculation that EMI will merge with another music giant – either BMG, owned by German media company Bertelsmann, or the music division of AOL Time Warner, despite the failure of merger talks with both.

EMI has long been the subject of controversy over the severance pay of its directors. Recently it was revealed that Ken Berry, Mr Levy's predecessor, received a £6m pay-off, while the former finance director, Tony Bates, got £1.7m. Ex- chief executive Jim Fifield left in 1998 with £12.5m, while former director Charles Koppelman departed with an estimated £30m pay-off.

Mr Berry was widely criticised for his strategy. During his tenure, EMI signed Mariah Carey, who later received a £20m pay-off after her first album for the company flopped. The strategy in the US was also questioned, particularly as stars such as Robbie Williams have not been able to repeat their British hits.

EMI has since restructured, with the loss of 1,800 jobs, and Mr Levy has signalled his intent to focus on talent-spotting and avoid paying out large sums for megastars.

Industry insiders have praised his strategy and said it is on track. But issues such as piracy are dragging global music sales down.

EMI made a loss last year of £153m due to exceptional charges associated with the restructuring. Its sales fell 8 per cent to £2.4bn.

EMI said contracts like those of its directors were common in the entertainment industry, and that it was in shareholders' best interests "to retain the flexibility to compete for top executive talent".