M&S needs to manage succession as well as recession

July 1, 2009

Marks & Spencer is finally getting to grips with the recession, first-quarter results from the bellwether retailer show. But it needs to sort out a row over management if its shares are to enjoy the full benefit.

Many investors are still up in arms over M&S’s decision last year to elevate the charismatic Stuart Rose to executive chairman — combining the roles of chairman and chief executive against corporate governance guidelines.

Rose survived a rebellion last year and must be hoping that forecast-beating first-quarter sales will draw the sting from opponents ahead of next Wednesday’s annual shareholder meeting.

But anger seems unlikely to die down. Three shareholder advisory groups — Glass Lewis, Pirc and RiskMetrics — have urged investors to back a rebel resolution which calls on M&S to appoint an independent chairman by July 2010.

The resolution, from local authority pension funds, is cleverly worded as it supports Rose’s re-election and so, unlike last year’s protest, is a clear vote on the principles of corporate governance and not on the man himself.

Anxious to avoid a fresh battle, Rose recently waived a third of shares awarded to him under a performance plan which some investors said was too generous.

To end the constant sniping that must be a distraction from running the business, Rose may have to compromise again.

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