Carlton directors have offered disgruntled investors a deal that would give controversial chairman Michael Green a future with the newly merged television company ITV, the BBC has learned.
A group of City investors controlling more than 30% of ITV have set an ultimatum of Tuesday lunchtime for Mr Green to resign.
Carlton, which is set to merge with Granada to form ITV, now proposes that he will step down voluntarily from executive chairman to non-executive chairman of ITV by May 2005.
The Carlton board also suggested they would install a strong non-executive vice-chairman to work with Mr Green.
But the offer is unlikely to satisfy Carlton's shareholders, according to the BBC's business editor Jeff Randall.
Calls for resignation
In a statement to the London Stock Exchange, Carlton's board earlier on Monday confirmed that a group of shareholders had asked it to ditch Mr Green as chairman-elect of ITV.
The board said it had refused because it believed that both Carlton and Granada needed to be represented as the two firms prepare to merge to run the ITV network.
It added that a management shake up in the midst of sensitive merger negotiations with the Office of Fair Trading would be highly destabilising and could put at risk some of the benefits of the merger.
Talks with shareholders
Carlton said it looked forward to meeting Fidelity, the investment group leading the revolt, to discuss a practical way forward.
But Fidelity said it had no plans for a meeting until it had heard from the Granada board, who are meeting Monday night.
BBC business editor Jeff Randall said Carlton directors held an emergency meeting in London on Sunday and issued a statement rejecting the investors' request to remove Green
"Green's not the kind of man to roll over. He's garnered the support of all Carlton's directors who are determined to defy their big shareholders," Jeff Randall said.
The company's shareholders are likely to see the directors' statement as a declaration of war, he added.
One told the BBC on Sunday: "We will not be going away quietly. Carlton's directors think we are not resolute, but we are".
The investors' ultimatum follows a showdown last week between a group of powerful Carlton shareholders led by Anthony Bolton of Fidelity, the fund management group.
The group called for an independent non-executive chairman from outside the enlarged group to front the new ITV business.
The shareholders are reported to have become disillusioned with Mr Green's management style, following his handling of the £1.4bn ITV Digital football debacle.
They were also concerned by Mr Green's recent comment that he would only retire at 80 and planned to work full-time as chairman of ITV.
Mr Green retains the backing of Carlton's non-executive directors.
But with more than a third of Carlton shareholders reported to be calling for his removal, Mr Green's position looks increasingly precarious.
According to press reports, the shareholders have pledged to use "all other measures open to us to ensure compliance" if Mr Green does not step down by noon on Tuesday.
The ultimatum comes less than month after Mr Green celebrated government approval for the £4bn merger of Carlton and Granada to create a single ITV company.
Mr Green, who has been chairman of Carlton since 1983, is set to become chairman of the enlarged group, with his counterpart at Granada, Charles Allen, becoming chief executive.