Stuart Rose and the Beethoven Effect

July 9, 2009

Beethoven

Beethoven

When Napoleon took on wider powers, Beethoven rejected his onetime idol. Is Stuart Rose getting the Beethoven treatment at Marks and Spencer?

Stuart Rose has won the acclaim of ordinary shareholders and institutional investors alike as CEO of Marks and Spencers. But his move to take on the powers of Chairman and Chief Executive has not been so widely approved. Is this a modern-day Beethoven effect?

Music lovers are brought up on the tale of Beethoven’s admiration of Napoleon and how it turned to wrath when Napoleon declared himself Emperor of France.

A work originally entitled “Bonaparte Symphony” … was renamed when Bonaparte crowned himself emperor, a move which angered Beethoven. As legend has it, the composer ripped through the title page and later renamed the symphony the Eroica, refusing to dedicate one of his pieces to the man he now considered a “tyrant”.

When Business Leaders fall …

The fall of a Business Leader can also be accompanied by a rapid flip ‘from hero to zero’ , as many case examples in LWD have illustrated. Recently a spate of examples accompanied the fall of failed financial executives such as Fred Goodwin.

The hero-to-zero effect in some ways is a throwback to the days of The Great Leader, a period during which charismatic personality was believed to be the driving force behind transformational change.

The Governance Issue

There has been uneasiness about the joint role since last year’s AGM. However, despite continued turbulent times in the retail sector, Sir Stuart’s track-record as entrepreneurial leader remains relatively intact.

At this week’s AGM he retained considerable support, although the Governance issue will not go away.

Sir Stuart has been under pressure from institutional investors for more than a year over the board’s controversial decision to allow him to hold the roles of chairman and chief executive, which is against best corporate governance.
[One] said if Sir Stuart were to stand down early as chairman, he should consider leaving the board altogether. Sir Stuart’s urbane response was to say he was “a servant of the board. If they wish me to stay I will be here until the latest July 2011.”
The Universities Superannuation Scheme called for Sir David Michels, deputy chairman and senior independent director to be made chairman at least on an interim basis. “If Sir David would become the chairman, and I would become the chief executive, it’s moving . . . back to the past,” Sir Stuart replied. And while Sir Stuart could charm the audience, he could not escape the words of Councillor Ian Greenwood, urging support for a motion for him to hand back [the Chairmanship] “Whatever happens we are not going away.”

The Wider Issues

Students of leadership will recognise the wider issues implied in the ongoing story of Sir Stuart Rose’s leadership. At one level there is the technical matter of corporate governanace. At another level these is the process through which a powerful leader appears to seize greater powers ‘in the interests of the company or country’.

In other words, the Beethoven effect.

Acknowledgement

Close examination of the Beethoven image reveals it to be an ironic comment on the great man’s coiffure, to be found on a blogpost by Charlie White


Ethical Companies, M&S and Plan A

July 9, 2008

Despite its recent problems, M&S retains a reputation as a ‘green’ company. We evaluate this ahead of today’s general meeting

Leaders we deserve subscribers will remember its brilliant leadership statement of commitment to a green agenda: ‘There is no plan B’.

Katie Stafford, Sustainable Development Manager at Marks & Spencer outlined it to The Oxford-Achilles Working Group on Corporate Social Responsibility last year [11th May 2007].

Marks & Spencer has announced ‘Plan A’, a business-wide £200m ‘eco-plan’ which will have an impact on every part of M&S’ operations over the next five years. The 100-point plan means that by 2012 M&S will:

• become carbon neutral;
• send no waste to landfill;
• extend sustainable sourcing
• set new standards in ethical trading; and
• help customers and employees live a healthier lifestyle

The green agenda at M&S

Stuart Rose arrived as a major reinforcement in the company’s battle to fight off Philip Green’s bid. But the company was already being credited with (and profiting from) a green profile.

Marks & Spencer’s new chief executive took time out from fighting off takeover bids and accusations of insider share-dealing to pick up Business in the Community’s Company of the Year award from the Prince of Wales in London last night. The awards were judged by more than 100 assessors over 12 months and M&S impressed them with its integration of a set of values into its business practices.

It is not the retailer’s first such recognition. The company has been ranked No 1 by Greenpeace on its use of non-genetically-modified foods, ranked as the top food retailer by Friends of the Earth on pesticide reduction, and No 1 by the Marine Conservation Society on fish sourcing and by Accountability/Insight Investment on labour standards. These ratings have contributed to M&S being named as the Dow Jones Sustainability Index’s most sustainable retailer in the world for the past two years.

Mark Goyder, director of Tomorrow’s Company, said: “Corporate responsibility is one essential building block of enduring shareholder value. I hope M&S’s outstanding record as a responsible company will be properly valued as part of the overall decision shareholders now have to make about its future.”

Rowland Hill, M&S’s corporate social responsibility executive, said the current management was fully committed to corporate responsibility. He said: “We’re very comfortable with Stuart Rose’s approach to corporate responsibility. We’ve had a chance to re-assess where we are and this has resulted in the re-endorsement of many budgets. Philip Green’s record with other retailers would make us, in the CSR department, less confident about the future should his attempted bid succeed.”

Our financialization commentator suggested that longer-term this will sustain the company, telling Leaders we deserve

In the current bear market and the economic environment I do not think that the City expects spectacular shareholder value from the retailers. So, the initiatives with clear story lines that respond to the current trends- 100-point 5-year plan with £200 million spending to become a green leader in retailing- can go well with the stock market because they are full of purpose and intent. In a financialized economy the job of CEOs also involves creating convincing corporate narratives for the stock market to support the share price.


M&S shareholders resist Chairman Rose

July 8, 2008

Big Investors at M&S are upset over Stuart Rose being given combined roles of chief executive and executive chairman. Shares have plummeted after the retailer revealed a drop in annual like-for-like sales. Rose anticipates two tough years ahead

In advance of the general meeting [Wednesday, July 9th 2008] City rumours pointed to two big investment funds (Schroders and Legal & General) as leading a shareholder rebellion.

Stuart Rose

As a corporate leader Rose ticks all the boxes. He came in to M&S as a white knight to protect the decline in the company’s fortunes, which had attracted unwelcome advances from the buccaneering Philip Green. In a few years he has justified the rejection of Green’s offer, with a turnaround in trading figures, and climb in share-price.

He was increasingly noted as a role model of a dynamic business leader. A recent award from The World Leadership Forum was based on a poll of chief executives of nearly a thousand British businesses. The clear winner was Stuart Rose.

Malcolm Turner, President of the World Leadership Forum said:

“We are delighted to announce that Stuart Rose is the winner of our Business Leader of the Year Award. He is plainly Britain’s most admired businessman, having dramatically improved Marks & Spencer’s fortunes while operating in a notoriously competitive and fickle market. We organised this award because we think that recent television programmes such as ‘The Apprentice’, or ‘Trouble at the Top’, bear little relation to the reality of corporate life. Worse still they often give young people, at the outset of their careers, an image of business which is inaccurate and damaging. We believe that highlighting the work of the best business leaders, and the best management practice, will pay dividends to the wider business world and give young people a less distorted view of commerce.”

Appointed Chief Executive in May 2004, Stuart Rose first joined Marks & Spencer in 1972. He moved to the Burton Group in 1989, becoming Chief Executive of the Multiples Division in 1994. He joined Argos plc in 1997 as Chief Executive to defend the takeover bid from GUS. He then became Chief Executive of Booker plc, which merged with Iceland plc in 2000. He joined Arcadia Group plc as Chief Executive and left in 2002 following its acquisition.

I’ve blogged on Rose a bit, but not in detail. In general he has avoided the leadership pitfalls that have been examined in Leaders we deserve.

Robert Peston neatly skewers British business leaders for avoiding the risks of exposure in tough media interviews. Stuart Rose has been an exception to the general point being made by Peston. He projects calm, thoughtfulness, and a capacity to hold on the practicalities of a story while retaining a sense of long-term corporate objectives.

But then things started turning nasty

In April [2008] Leaders we deserve reported on the decision by M&S to appoint Sir Stuart to the dual roles of CEO and Chairman. We picked up the possible problems of governance involved. The message released by outgoing Chairman Lord Burns suggested that the company was anticipating problems from its shareholders.

He was to be proved right

The reactions were largely negative, although comments suggested that the institutional shareholders might want to find some way of expressing displeasure that fell short of censoring Lord Burns or Stuart Rose.

What’s going on?

My question as the company faces pressure from its shareholders is: what’s going on?

We could assume that the institutional shareholders are motivated by concerns over corporate social responsibilities. If the customary city mindset still holds, that only seems likely where CRS aligns with self-interest.

In other words, the real goals of the shareholders are wrapped up in the rhetoric of CSR.

In which case, this another game of strategic chess.

‘We like you as a leader, Sir Stuart, but not if you weaken our influence over decisions you might make which might damage our investment value in M&S in the short as well as the long term’.

Before the battle

A day before the battle, M&S shares had slumped and then rallied slightly in modest levels of trading.