Milk processor Arla Foods has announced potentially lucrative incentive plans for chief executive Tim Smith and other top executives, including procurement director Peter Walker.

Under the three-year deal, Mr Smith will receive almost 550,000 shares, worth about 400,000 based on the current share value, if Arla’s share price movement and gross dividend payments are ranked in the top-quartile of food sector benchmark firms.

An Arla spokeswoman said such schemes were standard practice across the industry.

The package for former chief executive Neil Davidson, who retired last September, was worth 1.6m for his nine months’ work in 2005.