Marks & Spencer's dirty laundry

May 20 2005 by Nic Paton Print This Article

You would have thought Marks & Spencer chief executive Stuart Rose had enough on his plate turning around the troubled high-street icon without having to suffer this week's very public boardroom spat.

On paper, of course, it's little to do with him. Former Whitehall mandarin Lord Burns is to take over as chairman from current incumbent Paul Myners at the retailer's annual general meeting in July next year.

But in reality it is very much about him, or at least his close relationship with Myners, the man originally brought in as part of a "dream team" to help head off billionaire Philip Green's bid for the chain last year.

What appears to have happened is that when Myners, who was supposed to be a stop-gap chairman, indicated he would like to continue in the role permanently a rift developed with Misys boss and senior non-executive director Kevin Lomax.

Lomax was reportedly concerned that the rapport between Myners and Rose was too close and worried Myners was holding down too many other roles to devote enough time to M&S.

The compromise solution reached – that of Burns initially assuming the role of deputy chairman from October but not stepping up for 14 months – has led to suggestions of a "fudged decapitation", that Myners will be a "lame duck" and that it has all simply been a case of "tethering" egos.

In the wake of the Higgs corporate governance reforms, the non-exec has become a much more pivotal – and powerful – position.

While it is impossible to know the exact ins and outs, the M&S saga does signal a fascinating evolution in the role of the non-executive director. In the wake of the Higgs corporate governance reforms, the non-exec has become a much more pivotal – and powerful – position.

"Non-executive directors are becoming increasingly aware of their accountability. There is a whole new breed of non-executive directors coming along that will not just do what the chairman wants," suggests Susan Bloch, managing director of thought leadership at consultancy Whitehead Mann.

It was Royal Mail chairman Allan Leighton who famously coined the phrase "going plural" when he stepped down from the helm of Asda to take on a raft of executive and non-executive roles.

It is somewhat ironic then that the just as portfolio of directorships held by Myners was an issue, so it could prove a headache with Burns, too.

However good his relationship with Rose becomes – and there is no reason to believe it is going to be frosty – the number of directorial hats worn by Lord Burns (Pearson, British Land, Welsh Water, Abbey National to name but a few) could pose a problem going forward, particularly if M&S continues to struggle financially, warns Bloch.

"There is a strong feeling nowadays that you cannot do too many directorship roles. The demands kick in when a company is going through a crisis, and it is likely that in a company such as M&S the non-executive directors are spending more time on it than they had planned," Bloch suggests.

"What happens if you are sitting on the boards of 10 companies and five are going through crises?" she questions.

As The Times business editor Patience Wheatcroft pointed out this week, with retail sales cooling, the 14-month interval before Burns takes on the top job is likely to be a torrid time as it is.

"The risk is that whatever may have been agreed in fraught conversations over the past couple of days, the board will be gripped by tension and continued in-fighting will take precedence over the best interests of shareholders," she wrote.

Departures will be needed, she suggested, with Lomax a leading candidate to go.

The FT's Martin Dickson also warned that the compromise may not have calmed tensions and divisions could erupt again.

"But having salved their pride, the protagonists should be more inclined to be grown up – and board meetings have evidently remained pretty workmanlike during the recent squabbles," he said.

Whatever the merits of what has been happening at M&S – and the solution has probably been better than a full-blown resignation crisis – washing your dirty linen in such a public way can never be good for a business.

The challenge now is for Rose, Myners and Burns is put aside any differences, work together and not lose sight of their primary goal, that of wooing back the long-suffering M&S shopper.

As Bloch warns: "If things are dysfunctional at the top that will cascade down. People start concentrating on what is going on in the boardroom, concentrating on finding out what is happening and what it means for them and the customer gets forgotten."