Marks & Spencer will argue that Sir Stuart Rose’s elevation to executive chairmanship is “an exceptional step in exceptional circumstances” and pledge a return to corporate governance norms in 2011 in an attempt to pacify rebel shareholders.
The reasons for M&S’s controversial proposed boardroom changes will be set out “in considerable detail” in a letter being drafted as Retail Week went to press, a source familiar with the situation revealed.
It will be sent to the Association of British Insurers, which, along with investors Legal & General and Schroders, has been at the forefront of unprecedented City challenges to Rose’s power.
M&S will contextualise Rose’s promotion – which flies in the face of the City’s combined code on corporate governance – against a background of tough trading conditions and prospects, the extent of change at the retailer and the business implications if its preferred course of action is not followed.
M&S directors believe these factors mean Rose’s continued leadership is essential and his new responsibilities are understandable. But it is the crucial reassurance that concentration of power in the hands of Rose as executive chairman is emphatically a temporary measure that stands the greatest chance of swaying City opinion, however reluctantly, behind the proposal.
However, one corporate governance expert was cautious about how M&S’s appeal would go down. He said that three years would be a long time for “exceptional circumstances” to apply and that reaction would be better if M&S promised to resolve governance issues before 2011.
An analyst at one of the biggest banks hoped for an end to the row. The analyst said: “It’s an issue that needs to be resolved quickly. If it’s not, the potential is that M&S could lose Stuart.”
M&S revealed last month that Rose would become executive chairman from June 1 and had committed himself to remaining at the business until retiring at the July 2011 AGM.
Concerns that such a well-known company was defying corporate governance best practice prompted a storm of protest from prominent shareholders and City bodies.
* A leading private shareholders group has warned that attempting to force Rose to stand for re-election at this year’s AGM, as has been suggested by some critics, would be counterproductive.
UK Shareholders Association (UKSA) director Roger Lawson said: “I think that would be a divisive way of going about things.”
UKSA is not taking a formal line on M&S, but Lawson said: “Our view is that we generally support the combined code and we would look, therefore, to have a non-executive chairman.”
Private investors account for approximately 25 per cent of M&S’s shareholder base.
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