Justin King, chief executive of J Sainsbury, is in line to earn up to £13.6 million in cash and shares in the year ahead after a pay rise and bonus increase awarded following a turn-around at the business.

The supermarket’s annual report, published yesterday, revealed that Mr King was paid £1.92 million in the year to March before long-term share bonuses. He has received a 17.2 per cent rise in basic salary to £850,000 and a 41 per cent increase in pension payments to £255,000.

The executive, who is credited with reviving the Sainsbury’s brand, was also set up for a bigger long-term share bonus as part of the board’s attempts to create new incentives for him. He lost millions in potential rewards when a £10.1 billion private equity bid for the company collapsed in April.

In the year to March 2007, Sainsbury’s set aside shares equivalent to 180 per cent of his salary for Mr King under a long-term incentive plan. The 390,424 shares will vest in May 2009 if he reaches certain performance targets.

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In the year to March 2008, the company intends to set aside shares equivalent to 250 per cent of Mr King’s salary. That is the most that he could collect depending on targets relating to cashflow and return on capital at Sainsbury’s over a three-year period.

Mr King is already on course for a payout of 1.66 million shares, worth £9.1 million at yesterday’s share price, in May next year. That is when a three-year bonus plan linked to the company’s plan to increase sales by £2.5 billion will mature.

This lines Mr King up for a bumper payout together with his salary, pension, a maximum bonus equivalent to 150 per cent of salary, or £1.27 million, and the long-term incentive plan shares worth £2.13 million. They would pay out in three years’ time if he reaches relevant targets.

Beyond that, Mr King can defer up to 50 per cent of his bonus into shares for three years. If he achieves certain performance targets over that period, Sainsbury’s will hand him twice as many shares again.

In the year to March 2007, shares equivalent to 50 per cent of Mr King’s salary were set aside in deferred bonuses and these will vest in 2009 if he reaches targets.

Sir Philip Hampton, Sainsbury’s chairman, hinted that Mr King was in line for a pay rise in May as the supermarket group revealed a fourfold rise in pretax profits. He said that the board was “very mindful” of the high rewards that Mr King might have expected under private equity ownership.

CVC backed away from making an offer for the company after months of talks when Lord Sainsbury of Turville, a member of the founding family, refused to entertain the private equity firm’s 582p a share approach.

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