Xstrata shareholders are due to vote on the group's proposed US$30 billion Glencore merger on 12 July.
However they cannot oppose the retention packages, which were issued a red-top alert by shareholder group the British Association of Insurers this week, without also voting against the merger deal.
The BAI criticized the lack of any performance elements in the retention packages.
Analyst Andrew Keen said: “If the deal is unchanged, we believe a no vote is likely, given the concerns.”
“We believe a change in current terms is likely but our fundamental thesis is unchanged; reiterate ‘overweight’ recommendation and 1,430 pence target price.”
Xstrata intends to pay about £170million ($267m) to top managers to retain them after the proposed merger with Glencore.
Xstrata has said the retention packages are needed to retain key staff whose expertise is essential for future profit and growth.
The share price is down 2.7 per cent to 816.5 pence.