The £1.3m total emerged as the Confederation of British Industry defended a decision to appoint Sir Iain Vallance, the £665,000-a-year chairman of BT, to the review group drawing up guidelines for top pay.
Grand Metropolitan said Lord Sheppard's increase was an exercise to protect his pension when he retires next year. But he may have broken the spirit of new Institute of Directors guidelines that pay rises should take account of what is happening to staffjobs.
George Bull, the group chief executive, also saw his pay rise by 27 per cent, from £412,251 to £525,509.
Tim Melville-Ross, director-general of the IoD, said it was not his policy to comment on the pay of individual directors, but added: "You can draw your own conclusions from what we said".
Alan McDougall, a director of PIRC, the pension fund consultants, said: "Big increases in pay are insensitive at a time when you are letting go of employees."
Grand Met said that Lord Sheppard had not had a pay increase since 1991 and that his pension was based on his salary in the last full tax year prior to retirement in 1996. The spokesman added: "The remuneration committee did not see why his pension entitlements should suffer because of pay restraint in the last few years."
Lord Sheppard's pay has fallen back to its 1991 level in the current financial year.
Sir Iain is among seven new names joining the CBI group. Although he is not a target of the latest round of criticism of top pay, much of the recent anger that led to the setting up of the CBI group has been focused on other privatised companies such as British Gas and the electricity and water utilities.
Sir Bryan Nicholson, president of the CBI, said it was extremely difficult to have an intelligent discussion about pay rises without a representative of that group of companies.
Sir Iain set out his stall in an article for the Financial Times in which he said the fundamental principle of pay differentiation was "distributive justice''.
The other new members of the committee are Sir David Chapman of Wise Speke, stockbrokers; Sir David Lees, chairman of GKN; Geoff Lindey of JP Morgan Investment Management; Tim Melville-Ross of the IoD; George Metcalfe, chairman of Umeco, and Robert Walther of Clerical Medical and General.Reuse content