Britain's largest shareholder group is urging members to reject Six Continents' executive share option schemes, potentially threatening the company's plans to demerge its hotels and pubs business.
The National Association of Pension Funds (NAPF) believes the schemes' performance targets are too low, payouts too high and that they lack transparency.
The NAPF is urging members to take action at Six Continents' extraordinary general meeting on 12 March, called to approve the demerger and return £700m to shareholders.
But this could play into the hands of Hugh Osmond, the pubs entrepreneur stalking Six Continents, which owns the Holiday Inn and All Bar One chains. Mr Osmond is expected to table a formal offer early this week. Mainly in shares, the bid will be made through his company, Capital Management & Investment, and will value Six Continents at around £5.7bn.
The offer and the "no" vote from the NAPF will put pressure on Six Continents' chairman, Sir Ian Prosser, to adjourn the EGM and buy more time to see off Mr Osmond.
Six Continents' executives plan a new round of shareholder meetings once Mr Osmond has made his bid. If three-quarters of them express an interest in Mr Osmond's offer, then Sir Ian will almost certainly cancel the EGM.
A spokesman for Six Continents refused to comment on a possible offer. On the share option schemes, he said: "We believe they are fair and contain sufficient performance criteria to stretch and incentivise employees to grow the business."