The UK’s Combined Code on Corporate Governance requires public companies to comply with its recommendations, or explain why they have chosen to ignore them. As of today Marks and Spencer has a lot of explaining to do.
From 1 June, the company said today, Sir Stuart Rose will become executive chairman, effectively combining the roles of chair and CEO. This flies in the face of Combined Code orthodoxy. True, other colleagues are stepping up to take on some of Sir Stuart’s duties. Ian Dyson, currently finance director, will take on the additional responsibility of HR and operations. Kate Bostock, head of women’s wear, and Steve Esom, head of food, join the board.
Sir Stuart now says he will not leave the company before 2011, thus allowing his fellow executive directors time to build their case to win the top job in due course.
Shareholders and analysts will be concerned that this move formally concentrates too much power in Sir Stuart’s hands. One, L&G, went on the record with its objections only a few hours after M&S’s announcement.
Personally, I will take some of the governance gurus’ objections with an unhealthily large pinch of salt. Sir Stuart is clearly his own man, and has been well and truly in charge at M&S for several years. Lord Burns, the outgoing chairman, says that execs and non-execs alike at M&S are happy with the new arrangements. Where is the problem?
If Sir Stuart were a crook, or an incompetent, we might have grounds for concern. But this is someone who turned down the prospect of absolutely gigantic rewards, running M&S for Sir Philip Green’s private equity-style bid in 2004, and instead took the riskier and relatively much less well paid option of keeping M&S public. He has done an excellent job so far. If this is his chosen method of exit, and this seems to him to be the best way of blooding a successor, I think we should trust him and back his judgment.
Of course, if things now go badly wrong for him and the company I will be among the first to condemn him.