The revelations could not have been better timed to cause maximum damage: legislators were also due to discuss legal amendments the following day which would strip Mr Yeung of his position as chairman. A protest demanding lower fares was held by the Democratic Party outside the railway's headquarters.

And an announcement is imminent on whether the KCR or the rival MTR, which operates Hong Kong's underground railway, will win a contract to build a line from Sha Tin in the New Territories to the Central business district.

It was probably with these factors in mind that Mr Yeung faced the media at a ceremony to carve a roasted pig to celebrate completion of a new station. 'He was quite angry and he showed it,' said a KCR insider.

Mr Yeung said the salary, benefits and allowances paid to the executives were in line with those at other utilities.

The attacks were remarkable given that KCR is a profitable government-owned business which enjoys a reputation for running a regular and efficient service. They came at a time of major transformation of the railway and as it confronted a public with changing attitudes and expectations.

Observers said the episode was not surprising considering recent controversies with which KCR has been involved and the sometimes controversial style of Mr Yeung.

'There's been some bad chemistry with the Government over a long period of time,' said a consultant with close links to KCR.

Legislators were quick to seize on the issue as a populist cause at a time when utilities are under pressure to cap or reduce their charges, said the consultant.

Problems peaked over the Lok Ma Chau spur line to the border last year, when the Government decided to stop the KCR from building a viaduct through the Long Valley wetlands on environmental grounds.

Mr Yeung reacted negatively in public to the decision. He said the then-Director of Environmental Protection, Rob Law, had failed to understand the project. The spur line would be delayed by three years and two other extensions would be put off until the appeal had been heard, he said. A KCR spokesman later said Mr Yeung had been misquoted and the East Rail extensions would be finished by the 2004 deadline. The appeal was rejected in July.

The Democratic Alliance for the Betterment of Hong Kong lashed out at Mr Yeung, saying he 'turned passengers' interests into gambling chips' by linking the two other projects to the appeal.

Mr Yeung is a former high-flying civil servant who held the posts of Secretary for Transport and Secretary for the Treasury before stepping down in 1993. He is believed to be the highest-paid executive at KCR because he fills the posts of chairman and chief executive. His remuneration is said to be worth between $6 million and $6.5 million a year.

Frontier legislator Cyd Ho Sau-lan questioned officials last week over whether the decision to separate the posts was targeted at Mr Yeung.

KCR management's salaries and perks did not trouble Ms Ho, who said the company's $4.7 billion annual turnover and 'social impact' as a railway needed to be considered.

Deputy Secretary for Transport Arthur Ho Kin-wah said the changes to the two most senior posts were not targeted at Mr Yeung, who has agreed to remain for another two years as chief executive. Officials have insisted the roles be separate in line with international practice.

One of Mr Yeung's associates at KCR described him as a 'straight person', who told things as they were. He wanted to stay on to see the West Rail project completed, as he had begun his tenure in 1996 working on it.

DAB legislator Lau Kong-wah, who has been monitoring the KCR's performance for 15 years, said Mr Yeung was a good listener but he feels he is out of touch.

'When we are having meetings behind closed doors, Mr Yeung is very willing to listen to our opinions, even though he may have very strong, definite views which we can understand,' Mr Lau said.

'However, when he comes out in the open, he becomes a different person and reacts in a way that only infuriates the public further, which is very unwise at a time when accountability is high on everyone's agenda.

'He is acting in the same manner as when he was working for the colonial government - sitting comfortably high and above and paying no attention to public demands, which is totally out of touch by today's standards.'

Despite the fuss over management pay during the past week - and a $1.2 billion profit recorded in the first six months of the year - KCR says it cannot afford to cut fares in response to the economic downturn and is pressing ahead with a rise in April.

Mr Yeung also warned that a freeze in fares could only be achieved by cutting the pay of all 4,800 railway employees. He refused to comment further yesterday.

KCR seems to have its eye on the bigger picture. The Government has indicated it would like to see the rail operator floated on the stock market and its managers are pressing for a 2006 listing.

Glenn Schloss and Felix Chan are Post staff writers.