Pressure is growing on Eric Nicoli to stand down as chief executive of United Biscuits, the troubled McVitie's and KP snacks group which issued a profits warning on Monday and put its poorly performing US subsidiary up for sale.
Under the company's controversial three-year rolling contracts, Mr Nicoli could be in line for compensation of up to pounds 1.5m for loss of office if he were to step down or be forced out by an successful bid for the group.
Institutional investors are disenchanted at the company's poor run during his tenure and are awaiting visits from the company over the next few days to explain the situation. Since Mr Nicoli's appointment in January 1991, the company's shares have underperformed the FTSE 100 index by more than 35 per cent.
One institutional investor said: "That is dismal. Shareholders don't like that kind of sustained under-performance." Asked whether Mr Nicoli would survive the year in the job, the shareholder said: "He may have problems."
Mr Nicoli and the rest of the United Biscuits executive directors enjoy the kind of three- year rolling contracts roundly condemned by corporate governance specialists and the Greenbury Committee. Mr Nicoli earned pounds 505,000 last year.
Justifying the contracts, United Biscuits said: "Because the company is a perennial bid target, it needs to either pay thumping salaries or offer some degree of security to enable it to recruit top-flight people. Institutional investors accept this and we have not had a single letter of complaint."
The company said it had not yet decided to review the contracts in the light of the Greenbury report. "It has only just come out and they have had other things on their minds," a spokesman said.
Some analysts and investors feel that last February's appointment of Colin Short, theformer ICI finance director, as non-executive chairman has shaken up management. One analyst said: "There is no doubt he is making his presence felt. In the past, there was an element of not wanting to face up to how bad things were." Some institutions feel Mr Short may encourage a review of the three-year contracts.
United Biscuits shares rose 10p to 289p yesterday, though there are still few signs as to who might buy all or part of the Keebler business in the US.
A predator is yet to emerge, for the whole of United Biscuits, but Richard Newbolt, analyst at Lehman Brothers, said the rise in the share price reflected bid speculation as the company is now at its most vulnerable. "If it is to be bought, it seems obvious it would be now or soon."