Corporate governance watchdog Pirc has backed the proposed election of three new directors to the board of Alliance Trust and criticised the remuneration of chief executive Katherine Garrett-Cox.

Its report came as Alliance reported first quarter results which it said showed its new investment chiefs have turned round the trust's performance. Its shares hit a new high of 529p yesterday valuing it at £2.9billion.

Pirc however has said "increased independent representation is a valuable safeguard against group-think" on the Alliance board. It says the three directors proposed by 12per cent activist shareholder Elliott Advisors have significant relevant experience and that "sufficient assurance has been provided on the independence and calibre of the candidates to merit their election".

Alliance has launched a fierce defence against Elliott, claiming its proposed directors would not be independent and would act against shareholder interests.

Pirc also advises shareholders to vote against the company's executive pay, claiming that directors' remuneration "does not comprise any performance-related element". It says Ms Garrett-Cox's total remuneration of £1.3m equates to 298per cent of her £450,000 salary, "which exceeds the 200per cent of salary maximum considered best practice".

Meanwhile Alliance has responded to criticism that its in-house fund management has underperformed over one, three and five years.

Unveiling first quarter figures yesterday, Alliance said it had outperformed over one, three and six months.

It said the equity portfolio (as opposed to legacy assets), which notably lagged the world index last year, had beaten the index since Peter Michaelis was appointed head of equities and Simon Clements trust portfolio manager less than seven months ago.

Ms Garrett-Cox said: "We are pleased with the strong performance of Alliance Trust during the period which we believe shows that our strategy is working. The trust has outperformed the global sector over the first three months of the year, a continuation of the work Peter Michaelis and Simon Clements have done since they were appointed in September of last year."

Alliance's figures however do show that the trust's total shareholder return is below the average for the global sector of more than 30 funds over the standard measurement periods of one, three and five years. It is above the average over six months, three months, and seven years. On the weaker measure of net asset value total return, it is also ahead over one year, enabling Alliance to claim that the figures demonstrate "outperformance over most of these time frames".

In a recent note Numis Securities, advisers to Elliott, said Alliance's core claim that it "consistently delivers strong shareholder returns" was "not backed up by the statistical evidence". The latest metrics also fail to rank Alliance against its principal large global growth trust rivals in the sector, a comparison used by chief executive Katherine Garrett-Cox - also in Elliott's spotlight for her £1.3m remuneration - in the past.

Ms Garrett-Cox went on: " Both of our subsidiaries have also shown very encouraging progress and continue to grow, with Alliance Trust Investments seeing the strongest ever quarterly net inflows in its bond funds and Alliance Trust Savings exceeding £7 billion in assets under administration for the first time."

Alliance also noted that its share price had reached all-time highs, topping 500p for the first time and reaching 523p (now 529p), though there was no comment on the discount of share price to asset value which was at 13.3 per cent on March 31, far wider than that of most key rivals.

The Dundee-based group has yet to respond in detail on remuneration issues, though is likely to point to Alliance's unique status in the sector as a plc with subsidiaries.

Alliance said its own "rigorous and robust" search for a single new non-executive director was now under way and it would consider any shareholder nominations in that process.

Pirc said none of the proposed directors had any material connections with Elliott Advisors that would inhibit their ability to represent shareholders, that their independent insights would be an asset, and 70per cent of the board would still be made up of incumbent directors.