Thames Water shareholders attack Sir Robert Clarke's pay package

Institutions complained that, as Sir Robert is effectively "winding down" his involvement with the group ahead of his retirement in 1999, he should be paid a fraction of his current salary. Sir Robert was paid pounds 247,000 in the year to March but was awarded a 4 per cent "cost of living" increase in July. One leading shareholder said: "There is an element of principle here as to whether the remuneration committee is really doing its job. I believe institutions should make a stand."

Some investors feel Sir Robert is "hanging on" as executive chairman even though Bill Alexander was recently promoted to chief executive. They said Sir Robert's increased pay was justified when he was fulfilling the role of acting chief executive but should have fallen following Mr Alexander's appointment.

Another shareholder said: "You have to question whether the board is acting in the best interests of shareholders. If they want a chairman to stay on until he retires I don't see why he should get more than, say, pounds 100,000."

Thames Water defended its decision to retain Sir Robert as executive chairman on full pay even though a full-time chief executive had been appointed to replace Michael Hoffman. He left the group 18 months ago after a disastrous diversification policy.

A spokesman said: "What we have got is a strong central team that is delivering results in the utilities business and the non-regulated operations. There is still a role for Sir Robert."

The company denied that an 18-month handover was excessive and said Sir Robert was doing a full, five-day week. "We feel this is in the best interests of shareholders and neither we nor our brokers have heard from any investors."

However, the company hopes to defuse the situation by contacting its top 10 institutional investors. These include Chase Manhattan, Franklin Resources, MAM, Sun Life, Standard Life, Legal & General and Prudential.

Some institutions have drawn attention to Sir Robert's poor record in his executive position at United Biscuits, the McVities snacks group. During his four-year tenure as chief executive from 1986, United Biscuits shares underperformed the market badly. In the following five years, when he was chairman, they underperformed by more than 30 per cent.

Thames Water provoked the ire of Gordon Brown, the Chancellor of the Exchequer, this month when he learned that Sir Robert was to enjoy a pay rise even though his responsibilities were diminishing. The chancellor said he would not tolerate a "new round of boardroom irresponsibility" in the privatised utilities.