Three of upmarket department store David Jones' biggest shareholders have met for emergency talks with its embattled chairman, Peter Mason, as the revolt against the company's board reaches fever pitch and threatens to destabilise the group.
The meetings come ahead of David Jones' annual meeting on Friday, when the retailer is expected to be on the receiving end of a first strike against the remuneration report.
David Jones insiders have begun to question the judgment of Mr Mason on recent share trading by two directors as well as his chief executive succession plans.
A number of institutional shareholders are planning to vote down the remuneration report to send a clear message to the board about their anger over the looming departure of chief executive Paul Zahra.
Perpetual, which is David Jones' third-biggest shareholder, as well as BT, which is in the top 10, and smaller fund manager Pengana Capital, met the chairman individually to discuss the corporate governance firestorm that has now engulfed the retailer.
It is believed top of their agenda was the surprise announcement by Mr Zahra last month that he wanted to stand down from his position, and then the chairman's public defence of two David Jones directors, Steve Vamos and Leigh Clapham, who bought stock in the company only three days before better than expected quarterly sales results.
While many fund managers have come to accept Mr Zahra's reasons for stepping down - the chief executive of only three years said he was tired and needed a rest - investors have been increasingly uneasy about the chairman's decision to allow two directors to trade in stock before a price-sensitive sales announcement.
One fund manager said to allow the share trading was an "oversight at best and at worst it was a poor judgment call".
Although Mr Vamos and Mr Clapham traded stock inside David Jones' stated trading window for insiders, investors are questioning Mr Mason's judgment call in allowing them to do so.
David Jones insiders have also begun questioning Mr Mason's judgment in allowing the trade. As the chairman of a retailer, he should have known how price-sensitive the quarterly sales update would be.
The three fund managers who met Mr Mason are understood to have put this directly to him.
The Australian Shareholders Association this week joined an institutional shareholder revolt against David Jones.
Given poor results to date and the meagre prospects in sales, margins and multi-channelling, the ASA said the short-term incentives offered to executives were too generous.
A no vote on a company's remuneration report of more than 25 per cent at two consecutive annual meetings triggers a resolution to spill the entire board.