STAGECOACH, the Perth transport giant, suffered a shot across the bows from aggrieved investors over boardroom pay yesterday, despite an impassioned defence of its remuneration policy from chairman Robert Speirs.

At the company's annual meeting in Perth, some 14% of proxy votes were either absentions or were cast against the company's 2003 remuneration report, a significant display of dissent given that co-founders Brian Souter and Ann Gloag control 26% of the business.

When its annual report was published last month, Stagecoach was accused of ''rewarding failure'' by virtually doubling Souter's pay and benefits package in 2002-03 and handing a big pay-off to former chief executive Keith Cochrane, who quit in July last year. Souter stood down as chairman to take over from Cochrane.

Martin Griffiths, the finance director, and Graham Eccles, the rail director, also received higher bonuses, despite a plunge in shareholder value.

Stagecoach was worth (pounds) 3.5bn five years ago, but in October its share price fell to 12.5p, valuing the firm at just (pounds) 160m. The shares have since recovered, closing at 77p yesterday, a marginal increase on the day following an upbeat trading statement.

One private investor alleged that Souter and his colleagues had been rewarded for ''disposing of what we should not have bought in the first place'', namely the disastrous Coach USA acquisition. However, Speirs defended the rises, stressing that the executives had ''arrested the company's decline and kept profits within reasonable limits''.

He added that Stagecoach was obliged to pay competitive rates for its peer group to retain the best people.

Speirs said: ''We are not out of line with the rest of the (transport) industry; in fact we have underpaid several of our executives in past years. Brian Souter did not take a pay rise for several years and certainly did not take a bonus.''

Bonuses were based on personal performance targets upon which Speirs declined to elaborate in detail. However, he said Eccles' bonus was linked to his delivering the new South West Trains franchise, agreed last month.

Speirs said Stagecoach will look to increase its dividend ''this year and each year thereafter'' and will also take steps to further reduce group debt. The chairman said a priority is to maximise shareholder value from existing businesses, though it may seek small ''bolt-on'' acquisitions.

He said the firm is confident it can grow its core UK businesses organically, partly through its new, no-frills internet ''megabus'' service, which will be launched on routes between Glasgow, Edinburgh, Perth, and Dundee in September.

Another potential growth generator is the UK's first commercially-run combined bus and taxi operation, also launched in Dunfermline this month.

Souter told The Herald: ''We are trying to establish where we can get some organic growth in the business and these pilot schemes are quite important. I think that (megabus) will capture the imagination of younger people. The concept is really quire radical; we can sell up to 70 of the seats at just (pounds) 1 and the economics still add up. It is a pilot scheme just now, but if takes off it could be a driver of growth.

''The Fife taxi service got off to a very slow start but growth has been very rapid this week. We need to charge a higher price for that in the longer run.''

Stagecoach said trading in the first few months of the new financial year had ''met expectations''. Revenues in the UK bus business rose 8% in the 16 weeks ended August 16, while like-for-like revenues in the company's New Zealand operations rose 8.7% in the same period.

In the rail division, trading was described as ''strong'', with passenger volumes up on last year. Revenues rose 5.3% in the 16 weeks to August 16, but the company said operational performance continues to be adversely impacted by poor infrastructure performance by Network Rail.

Speirs said: ''A step change in the performance of Network Rail is required to provide a more reliable service for passengers.''

Stagecoach said it will press ahead with its disposal programme in the US, having raised $270m ((pounds) 171m) so far. Like-for-like dollar revenues for the three months to July 31 were 4% down on 2002, but the company described overall operating profits at Coach USA as ''satisfactory''.