Sainsbury family closes ranks to stave off humiliation

J Sainsbury has averted total humiliation at its annual meeting with shareholders today by persuading the Sainsbury family to use their 38 per cent holding in the company to support the vote on its remuneration report.

The beleaguered supermarket chain is now unlikely to suffer a defeat on the report. That is despite the fact that the influential National Association of Pension Funds and Association of British Insurers are urging investors to block the remuneration report, in protest at a £2.4m proposed payout for Sir Peter Davis, who was sacked as chairman of Sainsbury two weeks ago.

Analysts said that the Sainsbury family decided to support the remuneration report because they feared another serious knock to the company's board would almost have led to meltdown.

Keith Butler-Wheelhouse, the chairman of the remuneration committee, which signed off on Sir Peter's pay, has come under heavy criticism. The family's fear was that if the company's remuneration vote had been defeated, Mr Butler-Wheelhouse and possibly the entire remuneration committee might have been forced to resign, at a time when no one has been lined up to replace them. As it is, two members are set to receive a drubbing. Lord Levene and Jamie Dundas, who are standing for re-election to the remuneration committee, could suffer hefty protest votes.

Many of Sainsbury's major shareholders are outraged at the proposed performance-related award, which was agreed in a year when Sir Peter oversaw a dismal performance by the high street grocer compared with its peers.

It is understood that several of the Sainsbury family were thinking seriously of joining the No vote, or at least abstaining, until the company made a key statement on Thursday, saying it was withdrawing support from the aspect of its remuneration policy which entitles Sir Peter to a £2.4m bonus.

Judith Portrait, the solicitor who speaks for the 23 per cent stake in the supermarket chain owned by Lord Sainsbury of Turville, will now support the motion. Other family members representing another 15 per cent of the company are likely to follow suit.

While Sainsbury will be able to breathe a sigh of relief that it will probably not follow GlaxoSmithKline, the pharmaceuticals giant, into being only the second British company to have its remuneration report voted down over concerns about excessive pay, the company will not be able to relax. It has pledged to attempt to withhold the entire £2.4m from Sir Peter, though it may have to settle on paying some of the bonus, derived from share awards.

In addition, the company will try to reduce a separate sum of up to £2m which Sir Peter could receive because he has been sacked by the company. While the focus so far has been on the £2.4m, the generous terms of Sir Peter's severance pay are also likely to inflame the row.

Sainsbury is still bracing itself for a very bruising encounter at the AGM, to be held at the Queen Elizabeth II conference centre in London.