Arun Sarin, the chief executive of Vodafone, collected £7.27 million in salary and share-based bonus payouts last year in the wake of a strategic rethink prompted by shareholders that helped the world's largest mobile phones group to smash profits targets.

Mr Sarin's payout, although closely linked to performance, comes as Vodafone faces a potential showdown with investors over its Verizon Wireless stake in the US and amid growing shareholder concern about potentially excessive executive rewards.

Coming after Richard Lapthorne, the Cable & Wireless chairman, proposed potentially unlimited "private equity" style bonuses for directors, news of Mr Sarin's payout threatens to reignite the debate over boardroom rewards.

On top of his base salary of £1.272 million, Mr Sarin was paid £1.928 million as a short-term incentive bonus, according to the annual report published today. He took all of this in shares, Vodafone said.

Mr Sarin, who during the year sold off the Softbank division in Japan and returned £9 billion to investors, also qualified for a long-term incentive bonus worth about a further £4 million, based on Vodafone's prevailing share price. This was also paid in shares.

Moreover, the telecoms executive holds options to buy shares in Vodafone that are worth £3.18 million, the annual report states. Mr Sarin, Vodafone's chief executive for just under four years, owns 5,994,854 Vodafone shares, worth £9.7 million.

Last month Vodafone posted a 1.4 per cent increase in annual operating profits to £9.5 billion. More than £11 billion of write-offs and impairment charges meant the group made a pre-tax loss of nearly £2.4 billion. But this was much better than analysts had expected and sent the shares soaring to a five-year high.

A spokesman for Vodafone stressed the rigorous nature of Vodafone's performance targets for executives and said that the telecoms group was one of the first to grant shareholder votes on prospective pay deals. He pointed out that, for example, in order to qualify for a payout next year Mr Sarin had to deliver an increase in earnings per share (EPS) of between 5 per cent and 8 per cent. Analysts currently forecast EPS for Vodafone of 4 per cent.

Track Shares in Vodafone here.

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