Alain Levy, the former head of recorded music at EMI who was ousted in January after poor sales in the UK and US, received a package worth around £4.6 million, according to the company's annual report.

Mr Levy was paid £2.5 million "compensation for loss of employment" and £1.1 million "incentive remuneration" as well as his £912,000 salary. He will also continue to receive retirement and other company benefits for a year after his departure, under the terms of his employment agreement, the report said.

He also received 20 million share options under the group’s long-term incentive plan, which he can hold for up to a year after leaving, or for six months if there is a change in ownership.

The drop in value of EMI’s share price, however, has left most of the options worthless.

EMI announced Mr Levy's departure "with immediate effect" on January 12 as it said annual sales in its recorded music division - home to Lily Allen, Norah Jones and Robbie Williams - were likely to be up to 10 per cent lower after a disappointing Christmas.

Details of the pay-off come as EMI is rumoured to be facing a fresh takeover attempt from rival Warner Music, which threatens to challenge the group’s agreed sale to Terra Firma, the private equity firm.

The group announced the 265p-a-share deal with Terra Firma last month, valuing the group at £2.4 billion, as it posted a 61 per cent drop in underlying profits before tax to £62.7 million.

But rival Warner Music has not ruled out a counter-bid, with rumours over the weekend suggesting it was planning to step in with a higher £2.5 billion offer.

EMI, which is home to stars including Lily Allen, Norah Jones and Robbie Williams, reported total profits before tax and adjustments down from £118.1 million last year to a loss of £263.6 million.

The firm has announced a £110 million restructuring programme, including savings from the removal of layers of management.

Mr Levy was brought in to replace former EMI music boss Ken Berry in 2001 to halt the sales decline that had already begun to hit the group.

The former global president of PolyGram failed to sustain an improved performance, with EMI’s music business seeing a 15 per cent drop in sales in the year to the end of March.

He started his career in the music industry in 1972, working at labels such as CBS International, now Sony BMG.

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