The transport giant suffered a 25 per cent vote against the near-£2 million package paid to chief executive Tim O'Toole last year, and an 11 per cent vote against remuneration policy.
Shareholder Gordon Casely asked: "Why is Mr O'Toole worth his remuneration and is everybody happy with it?" Employee shareholder Alan Walker said: "Everybody is talking about pay restraint...I feel very disappointed and let down and I will be voting against the resolutions."
Mr McFarlane told the meeting that the bumper pay-out, 86 per cent up on 2012, was "a big mixture of things that were decided in the past", notably a share award made to help secure Mr O'Toole in 2010 when he had "competing attractive opportunities" and a bonus which he had previously waived.
He went on: "FirstGroup is a large and complex group across bus and rail with major operations in the US in the middle of a very difficult turnaround. We have £6.7 billion of revenues and £5bn of assets, 117,000 employees across the world making us Scotland's largest private sector employer so we are a very important company for Scotland."
The chairman said later he and Mr O'Toole had been getting that message across to key decision-makers in Scotland this week "to shore up our bid" to retain the ScotRail franchise as "the only Scottish company bidding".
Mr McFarlane said Mr O'Toole had inherited businesses that "should have performed better" and deserved recognition for the turnround progress last year, which had also seen share price gains.
"Our remuneration is going to be commensurate with a FTSE company which is where we should be, we need the management team that can take us there."
But the chairman went on: "It is appropriate in the changing circumstances of the group to have a deep look at this again because we have had a number of comments from shareholders about it. My personal view is that what Tim did for the group in the past 12 months is worthy of what he received."
Former global banker Mr McFarlane, a Scot who took over from fund boss Martin Gilbert following the shock £615m cash call to shareholders last year and who postponed a dividend resumption this summer, warned: "It will take some time before the group can get a profit with consistent surplus cashflow that can be distributed to shareholders."
Meanwhile, the group had last year ploughed £465m largely into redressing years of under-investment in its UK bus arm, the chairman said, which with its First Student operation in the US were the key turnround areas.
"I am confident these issues are resolvable over time," said Mr McFarlane, who also chairs Aviva.
Mr Casely returned to the fray to claim that ScotRail's long-distance rolling-stock was unfit for modern inter-city services and deserved to be "at the bottom of the North Sea". Mr O'Toole responded that rolling-stock was largely a specification of the government. "We always want more trains, we would dearly love more rolling-stock but you have to reach an agreement. The length of the franchise is shorter than the life of the asset and that mismatch causes the need to negotiate."
On the turnround of its bus operations in conurbations including Glasgow, by restoring frequencies, cutting fares and investing in new buses, Mr O'Toole said: "We had to put more bums on seats if we were going to have a sustainable company."
But pressed by local employee shareholders on why the new investment was yet to reach some of Aberdeen's bus fleet, UK bus director Giles Fearnley said: "Unfortunately it takes time to get round everywhere. Not enough buses were brought into the fleet outside London for very many years."