As Eircom shares plunged to a new low of €2.40 on the Dublin market - down 12 cents on the day - fund managers threatened yesterday to vote against the re-election of chief executive Mr Alfie Kane and other directors to the board of Eircom next month.

They are contemplating the unprecedented move in protest at the "excessive" remuneration package paid to executive directors Mr Kane and Mr Malcolm Fallen, the Eircom finance director last year. Bonuses of €1.2 million (£957,564) were paid to the two men last year on top of their combined salaries of €689,737.

Irish pension and investment fund managers - who own about 20 per cent of Eircom - are now considering how they will vote on a number of motions at the annual general meeting in Dublin on September 13th.

Voting against the re-election of Mr Kane and the three other directors up for re-election at the agm, Mr Marten Pieters of KPN, Ms Annika Christiansson of Telia and Mr Paul Mackay, the Dublin accountant and Progressive Democrats' treasurer, is being seriously considered.

KPN, the Dutch phone company and Telia, its Swedish equivalent, are planning to sell their combined 35 per cent of Eircom over the next year and their representatives will leave the board when that happens.

One senior fund manager summed up the annoyance that he and his colleagues feel about the size of the payments and at the lack of an explanation in the annual report as to how they were earned. "They appear to have got the bonuses without achieving anything tangible and there is no real disclosure on payment criteria in the annual report," he said.

Another fund manager commented: "The whole situation on the remuneration packages is very unsatisfactory." Both are thinking about voting against the re-election of the directors as a protest. While it is not unusual for institutions to be privately critical of companies, it is rare for them to vote against the recommendations of a company board. Normally they either support motions put to a shareholder vote or abstain where they have reservations.

Another fund manager contacted yesterday said that he had not decided how to vote his shares, but was also considering tactical voting to show his displeasure. "It [the a.g.m] is going to be a circus," he said.

Institutional investors are painfully aware that by voting against the board they could further depress the Eircom share price and damage their own funds' performance. Many have already expressed their displeasure privately and will leave it at that.

"We are unhappy but ultimately we may not vote against the board. But we will communicate to them that we are unhappy, that they have not handled this well and that we will be watching them in the future," one fund manager said. Another disgruntled manager said: "Normally in this sort of situation we would show them how we felt by voting with our feet, but in this situation there is very little liquidity in the shares so it's not really an option. So we will make a shot across their bows behind the scenes." The investment manager's anger was not restricted to Mr Kane. "The board of the company have been incredibly naive in the way they put together this scheme and presented it. But If I ask myself have they done some thing so bad that they should go, I have to answer no," said one large investor.

"The discipline of the capital markets will sort this out," said one fund manager. He said that if the share price is still at its current level in a year's time, serious questions will be asked of the roles of senior Eircom executives. The manager plans to support the company. The bonuses will not be voted on at the annual general meeting - but are expected to come up for discussion under either the first motion - the reports of the directors and auditors - or in the third motion - the re-election of Mr Kane. The executive share option scheme, which could grant Mr Kane options worth over €1.5 million will be voted on, but is expected to get the support of the institutions.

The Irish Association of Investment Managers - of which the big investors are members - has agreed the scheme with the Eircom remuneration committee following difficult negotiations. This committee also agreed other elements of the remuneration packages.

The Eircom remuneration committee, under chairman Mr Ray MacSharry, had sought a scheme based on increases in the company share price and dividends. But the IAIM insisted that the scheme include a financial underpin to ensure that performance criteria were in place before potentially lucrative options could be awarded. As one fund manager commented yesterday "the allocation of the initial tranche of options at current market prices is less than satisfactory, but at least they can only exercise them if they meet some hurdles on the performance of the company".

Eircom share row is a local storm in a global teacup: page 4