Jefferson Smurfit Group has defended the amount it pays chairman and chief executive Dr Michael Smurfit.

Mr Ray MacSharry, who heads the group's remuneration committee, told an incredulous annual general meeting yesterday: "The terms and conditions of Michael Smurfit are at the top end of Smurfit's peer group because of his expertise and experience, and he's entitled to those." For an hour and a half in the Burlington Hotel, Dr Smurfit and the Smurfit board suffered a barrage of criticism over his £5.2 million (€6.6 million) package last year. There was never any doubt that the challenge would be comfortably repulsed but the vote on the floor was too close to call on a couple of occasions, forcing Dr Smurfit to rely on proxies.

The message from the board was that Smurfit is a big company and Dr Smurfit is worth every penny he is paid.

As expected, none of the three Irish institutions - Aberdeen, Irish Life and AIB Investment Managers - that voted or abstained on some resolutions in protest at Dr Smurfit's remuneration package spoke at the meeting. It is understood that Smurfit's largest shareholder, Bank of Ireland Asset Management (BIAM), also abstained on the motion to re-elect the five directors. This means Irish institutions holding 16 per cent of the shares either abstained or voted against this key motion.

Sources close to BIAM said it had received assurances that steps would be taken soon to improve Smurfit's corporate governance.

All of the motions at the a.g.m. were carried. The motion to reelect Dr Smurfit's brother, Dermot, was carried by 535.8 million votes to 37.7 million votes. All the other motions were carried by roughly similar margins, but this means that less than 50 per cent of Smurfit's 1.088 billion shares were actually voted in favour of the directors' reelection.

The tone of the meeting was set early in a poignant statement from a Smurfit pensioner. She said she supplemented her non-index linked Smurfit pension by selling Smurfit shares. "For the past three years, I've been trying to sell shares but the price has plummeted. My broker has told me the market has lost confidence in Smurfit. I'd like to sell and reinvest, but am I going to be alive to do that? You are doing your best for the board but not for the shareholders," she said.

The attack was then taken up by Senator Shane Ross, who tabled a series of questions to Dr Smurfit including whether he would insist on a similar package this year if the shares continued to lose value. Dr Smurfit said: "The Smurfit Stone figures for the first quarter show it's unlikely the package I obtained this year will be obtained next year. I say this sadly for both of us."

On why his brothers, Mr Dermot Smurfit and Mr Alan Smurfit, were paid more than the chief operating officer, Mr Gary McGann, even though they report to Mr McGann, he said: "Mr McGann is paid less than my brothers because they've been longer with the company and they are both deputy chairmen. That's the answer; you may not like it, but that's the answer."

Asked by one shareholder, Mr Ken Murray, why he doesn't hand back this bonus, Dr Smurfit said: "That would be an admission I'm overpaid." When asked if he intends to retire, the 64-year old Dr Smurfit replied: "I will retire when I feel like retiring."

Mr MacSharry was finally called on to state why Dr Smurfit was paid so much. He said: "In 1968 when Jefferson Smurfit snr was trying to bring Michael Smurfit back from England, the basis for determining his salary and bonus was 2.5 per cent of pretax profits. In 1995, the remuneration committee and Dr Smurfit agreed to change his contract and that's why there's now a cap on his bonus."

Without the cap, he said, the chairman's remuneration package would be larger.

"We look at the peer group, we take advice and look at other factors." Asked about charitable conditions by the group, Dr Smurfit appeared to get confused, saying: "What I do with my money is my business."