Lord Burns, the departing chairman of Marks & Spencer, writes with the clarity of a former Whitehall mandarin. But his message to shareholders seeking to clarify the company’s succession plans has been interpreted by the BBC as acknowledging concessions after protests from its major shareholders
Last Month [March 2008] Marks & Spencer announced that Stuart Rose would stay with the firm for an extra two years, until 2011. In view of Sir Stuart’s reputation, the move was seen as one aimed at reassuring various groups of the future of the firm under difficult trading conditions. However, the move was also seen as raising governance issues of one person as chairman and interim CEO. In a letter to shareholders, Chairman Lord Burns subsequently clarified the situation.
The BBC reported the statement, with quotes from the M&S chairman Lord Burns, but an examination of the original document suggest the BBC report should not be taken as a reliable summary of its contents.
In somewhat picky fashion, I’ll comment on the BBC report, point by point, which shows how much of such a report derives from an assumption which goes beyond the established facts.
I am now writing to provide some detail of the Board’s deliberations prior to making that announcement [over the interim appointment of Rose as executive chairman and CEO].
[All O.K. so far. No problems with the BBC report]
Marks & Spencer has offered shareholders concessions over controversial plans to name Sir Stuart Rose as executive chairman.
[Wrong. The letter offers clarifications not concessions].
In March, M&S said chief executive Sir Stuart would stay with the firm for an extra two years, until 2011, and be made executive chairman from 1 June.
[Correct. Well done, BBC]
But shareholders criticised the plan saying it gave too much responsibility to one executive.
[Wrong. See above. Nothing in the M&S statement. ]
There are speculations around that have been picked up by the BBC when it suggests that
Legal & General Investment Management have aired concerns that corporate governance standards should not be diluted “particularly in leading UK companies”.
[Maybe. It would have been nice to learn where the BBC obtained the information.]
…Concessions include yearly elections for Sir Stuart and no pay increase.
[Wrong: The M&S statement does not mention concessions]
Other measures proposed in the letter to shareholders, include appointing Sir David Michaels as deputy chairman while maintaining his position as a senior independent director. The retailer also said two new executive directors would be appointed and “significantly enlarged responsibility” would be given for the group finance and operating director. And to ensure the board has a majority of independent directors, the firm would hire an additional non-executive director
[That assumption again. As the BBC writes it, we are following the assumption that these are new concessions to shareholders, rather than clarifications of the status quo. Maybe I am missing something?].
Sir Stuart was initially appointed for a five year term in 2004, to turn around the business. But no obvious candidate emerged to take over in 2009 said M&S and given the recent uncertainty in the retail environment, the firm decided to extend and expand his position.
[Correct. Well done, BBC]
But leading investors opposed the move, with Legal & General Investment Management, which holds 5% stake in the firm saying corporate governance standards should not be diluted “particularly in leading UK companies”.
[As mentioned above, this is dodgy. In the letter released on the M&S website, fLord Burns acknowledged the plan would give cause for concern, and goes to some lengths to explain how the decisions were reached, and what safeguards were included to deal with any concerns about governance. But there are no specific details of shareholder opposition in the letter.
As the BBC writes about it, the letter is a response to events after the recent announcement, rather than clarification. The mention of Legal and General leads to the possibility that the BBC has acquired some information that they are reluctant to provide in a manner that reveals its origins]
What’s Going On
The Telegraph’s Damian Reece gets far more deeply into what happened. He outlines an explanation based on leaks and fear of leaks. There clearly has been a lot of activity behind the scenes since the original announcement by M&S. It would have been helpful if the BBC had found a way of differentiating between signalling what was believed to be going on, and what could stand scrutiny as substantiated facts.
Does any of this matter?
Maybe I am being pedantic. I am concerned that the BBC appears to be dropping below the standards I expect of it as a leading component of the Brand UK
Who owns the problem?
In preparing this blog post I wondered who was credited by the BBC for its report. Interestingly, it has no names attributed to it. Nor did the earlier BBC report a few weeks ago
After my snidy remark about the anonymity of the BBC reporting I thought I’d do the honourable thing by accepting authorship of this blog, which is claimed by Tudor Rickards. Views expressed are his own, and have been made on a personal basis.
The post was prepared solely from information available in the public domain.