Northern Rock’s embattled board was under growing pressure last night after an investor watchdog attacked the lender for awarding big executive pay rises shortly before it had to seek a bailout from the Bank of England.

Pensions and Investment Research Consultants (Pirc) criticised Northern Rock yesterday for recommending the increases at its annual meeting on April 24, just days after the Financial Services Authority (FSA) had told British lenders that severe problems in the American sub-prime mortgage lending market posed a growing threat to their stability.

David Baker, Northern Rock’s deputy chief executive, received a 16 per cent rise in basic pay to £530,000. Keith Currie and Andy Kuipers, the treasury and commercial directors, enjoyed 14 per cent rises in basic pay from £365,000 to £415,000, Adam Applegarth, the chief executive, was awarded a 10 per cent rise, from £690,000 to £760,000.

Three months later the company blamed the sub-prime crisis when it issued a profit warning.

Pirc said that it was clear at the time of the AGM that Northern Rock’s business model was being stretched and that the warning “sits uncomfortably with the large increase in basic salaries for executives at the company”.

Tom Powdrill, Pirc’s spokesman, said that Northern Rock’s board had also set “very weak earnings targets” for its executive bonus scheme at the AGM. The revised arrangements effectively made it easier for executives to be paid their bonuses without significant improvement in the group’s performance.

Pirc said: “The impact [of the sub-prime crisis] on their business must surely have been known when the remuneration consultants proposed such a weak earnings measure following their review of pay arrangements.”

Mr Powdrill said: “The earnings targets were not particularly stretching. It was pretty soft.”

He said that before the Bank of England’s bailout, Pirc had downgraded its rating of Northern Rock’s remuneration policy from BCC to CDD.

Northern Rock’s annual meeting was held just four days after Clive Briault, the FSA’s managing director of retail markets, told the Council of Mortgage Lenders that British banks could follow their troubled American counterparts unless they adjusted their practices.

Last night Mr Applegarth was facing growing pressure to resign. Investors and banking experts said that he was unlikely to survive in his post for more than a few weeks.

One fund manager with Northern Rock shares said: “I cannot see how he can possibly survive. This was his strategy and it is now in tatters. Once the immediate crisis subsides, he should stand down.”

Steven Janes, an expert in banking law in Sherrards Solicitors, said: “From the perspective of investors and depositors, I really don’t see how he can stay. He must have known for some time that the group’s liquidity was coming apart. He has failed to reassure people that the bank remains stable.”

David Buik, an analyst with Cantor Index, said that Northern Rock’s strategy had been “bordering on the reckless”. He said that Mr Applegarth bore ultimate responsibility, but that an immediate resignation would destabilise the situation further.

Even if Mr Applegarth, whose pay package was £1.3 million last year, is ousted by the board, he will still benefit financially. Mr Applegarth, who is 45 and has worked for the group for 24 years, would probably receive another year’s salary. He has amassed a pension fund entitling him to payments of £266,417 a year and owns almost 100,000 shares in the group - although their value has fallen steeply in recent days, to £430,365, against a £1,151,572 peak last year.

Credit Suisse analysts said on Friday that Northern Rock was an “increasingly likely” bid target. More falls in its stock price are expected today, which would increase its appeal to a bidder.

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