PRESSURE has mounted on Edinburgh oil explorer Cairn Energy after the Association of British Insurers (ABI) issued a rare "red-top" alert over payments of £4 million to founder Sir Bill Gammell revealed in The Herald yesterday and it emerged two other executives have received bumper termination payments.

A "red-top" from the ABI, which represents about 20% of UK shareholders, is the most serious warning to investors of a breach of governance norms.

Red-tops have previously been issued on rare occasions such as contentious fundraisings by Barclays and Bradford & Bingley during the 2008 banking crisis.

Sir Bill was awarded a £1.4m termination payment by Cairn after moving from chief executive to chairman in the summer.

He also received a £3.5m incentive payout for overseeing the sale of a 40% stake in Cairn India, which was paid in the form of £2.5m of share options and a £1m charitable donation made on his behalf.

The ABI's attention is focused on the granting of the shares because this will be subject to a vote on January 30 when investors gather to approve a £2.3 billion payout resulting from the sale.

It is understood that investors are concerned that the award, which will vest in three years, is not subject to performance conditions or his remaining with the company.

There are also questions about the benefit to the company of making the award.

Investor adviser Manifest has already raised questions about the payment.

Such transaction bonuses have been controversial in the past due to worries that they might motivate executives to complete deals that are not in the company's interests.

For instance, there was an investor rebellion in 2001 over £2.5m of bonuses paid to four Royal Bank of Scotland directors, including the top two executives Sir George Mathewson and Fred, later Sir Fred, Goodwin, for their part in overseeing the £21bn takeover of NatWest.

Cairn, however, has stressed that Sir Bill was the prime mover in overseeing the $6bn (£3.7bn) Cairn India stake sale to Vedanta Resources, which triggered the proposed large payout to investors.

Sir Bill will receive around £5m from the cash payout in respect of his shareholding in Cairn.

There have also been mutterings that investors could address concerns about the £1.4m termination payment when there is a vote on Cairn's remuneration report at an annual meeting likely in May.

After recent corporate governance reforms it is unusual for a chief executive to move directly to the chairman's position where he is meant to monitor executives' activities.

It is particularly unusual, one source said, for a termination payment to be made if they are staying with the company.

A prospectus issued by Cairn concerning its cash return shows that two other executives received termination payments after the June reshuffle that saw legal and commercial director Simon Thomson become chief executive.

Malcolm Thoms, who was chief operating officer, and Philip Tracy, engineering and operations director, received termination payments of $2.1m and $1.5m respectively after they left the company.

It is not the first time that Cairn has become embroiled in a row over pay. In 2009, it saw one in five shares cast against its plans for executive incentives.

Separately, there was a further development in the debate about executive pay yesterday when funds giant Fidelity Worldwide Investment, which manages £165.5bn of assets, added its voice to calls to beef up investor powers.

It wants to see investors give approval in advance and by a majority of at least 75% to bonus payments.

Dominic Rossi, chief investment officer for equities at Fidelity, said: "The simple truth is that remuneration schemes have become too complex and, in some cases, too generous and out-of-line with the interests of investors."

l Meanwhile, reports yester- day said that India's regulator has approved Cairn India's plan to boost output at its Rajasthan block by 25,000 barrels a day.