Disgruntled shareholders of retailer WH Smith have failed to block a £2.6 million "golden hello" package for new chief executive Kate Swann.

Voting at the group's annual general meeting in London revealed nearly 34 million shareholders had sought to kill a pay and bonus deal, which they claimed was not tied closely enough to performance.

But rebel shareholders were outnumbered by the 98 million voters who backed the remuneration package of the 38-year-old former managing director of catalogue retailer Argos.

Chairman Richard Handover, who will be stepping down when a successor is selected, told the meeting that the pay package, which includes a basic salary of £475,000 and compensation of £500,000, was justified to tempt Miss Swann away from her previous post.

Miss Swann had "lost money against what she earned before" and would have to turn around a poor trading performance over the past year and lift the share price to net share options worth £1.43 million.

The National Association of Pension Funds (NAPF) had earlier advised its members to vote against the pay deal, while the Association of British Insurers (ABI) has also voiced concerns.

Last year Mr Handover, who has come in for heavy criticism, was paid £554,000 including bonuses. He is on a two-year deal after standing down as chief executive in June.

The new chairman will face long discussions along the boardroom table with Ms Swann if the company is to get back on its feet. One of the options open to them is the axing of jobs.

As reported earlier this week, the company has hinted that redundancies are on the cards at its two offices in Pipers Way and Greenbridge. Jobs could also go in London. Around 1,500 people are employed in Swindon.

In the three months to Christmas the company share prices dropped by almost 20 per cent.

The retailing giant has now sold the loss making American side of the business USA Travel Retail in its recovery bid.

Kevin Shoesmith