LAPFF adds pressure for independent M&S chair

UK - The Local Authority Pension Fund Forum (LAPFF) has tabled a shareholder resolution calling for Marks & Spencer (M&S) to appoint an independent chairman by July 2010, following the company's failure to split the roles of chairman and chief executive.

Sir Stuart Rose was appointed to the new role in 2008 despite the UK Code of Combined Business stating the two positions "should not be exercised by the same individual" and opposition from 22% of shareholders at the annual general meeting (AGM).

Although under the terms of the appointment Rose will need to be re-elected to the position at the 2009 AGM, the LAPFF, whose members now own over 1% of M&S, warned last July that unless the two roles were split ahead of the AGM it would table resolution for an independent chair. (See earlier IPE article: LAPFF issues deadline for M&S governance)

The LAPFF claimed despite shareholder concerns the company "has not moved to appoint an independent chair. Therefore, the Forum has filed a resolution with the company", which it said is designed to provide a "safety valve" for shareholders who want best practice in board governance but do not want to vote against Rose.

Councillor Ian Greenwood, chairman of the LAPFF, said corporate governance is ultimately about ensuring the right structures and policies are in place to ensure companies are well-run.

He said: "The Combined Code has evolved over time through patient collaboration between companies and investors. Therefore, any company that effectively says to investors we don't need to follow the rules raises a red flag."
 
In addition, Greenwood warned that after comments made by Paul Myners and Hector Sants at the recent NAPF investment conference earlier this month - suggesting shareholders did not do enough as engaged owners before the financial crisis - "we believe it is important that shareholders demonstrate that they will raise their game". (See earlier IPE articles: Myners wants legal governance duty for managers and FSA attacks investors for not doing enough)

"Since this case represents such a significant breach of long-established and widely-accepted best practice it is incumbent on shareholders who do take their ownership responsibilities seriously to challenge it. This resolution will enable them to do so more effectively," added Greenwood.

Confirmation of the shareholder resolution coincided with the release of a final quarter for 2008 trading statement from the high street retailer, in which M&S revealed UK sales dropped 0.3%, although UK like-for-like sales were -4.2%, with declines in both general merchandise and food.

While online sales increased 20% and international sales jumped 23%, Rose confirmed "we expect UK retail gross margin to be around 175 basis points lower than last year". M&S' full results will be released on 19 May 2009.

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