City & Business: Why the good guy was never going to win

Peter Salsbury seems like a nice guy. A conscientious company man, hard working and intelligent, who worked his way up the incredibly greasy pole that is Marks and Spencer, until he found himself on the board and in the court of the volatile Sir Richard Greenbury.

And that is where it all started to go awry. For the best part of a decade most people outside M&S and many within it knew that the company had to change. Its heavy dependence on British clothing suppliers was traditionally its strength, allowing it virtually to invent the "just in time" supply chain and deliver excellent quality at quite reasonable prices. But by the early 1990s, the dynamics of the clothing industry had changed so much that M&S was in danger of being left behind.

By the time Salsbury was appointed chief executive of M&S, the company was so far behind its main competitors that it needed radical surgery. Salsbury has been quick to act, cutting many long- standing UK suppliers, such as William Baird and Courtaulds, off at the knees.

The thing is that however radical and dynamic Salsbury is, he is facing an almost impossible task: that of winning over either the City or the internal baronies at M&S.

The baronies are resistant to change. Many in the buying department have no experience in dealing with suppliers in the Far East, who see M&S not as a demanding but paternalistic partner, but as just another customer who has to wait its turn for service behind The Gap or Warehouse. They may not be willing or able to move at the pace Salsbury wants (a pace dictated by the fact that he has probably been desperate to bring in many of the changes for the best part of a decade).

The City, though, is even more impatient for change. It wants M&S transformed into Matalan at the double. It sees Salsbury as an insider, unwilling to "think the unthinkable", as the buzz-phrase goes. Plus M&S needs a new chairman. And the word coming from Baker Street is that M&S cannot find someone acceptable to the City who is willing to defend the old regime.

It seems that a new chairman may face the same problems that Sir George Bull found at Sainsbury or Sir David Rowland at NatWest. Whether for sound business reasons or merely to placate the City, both chairmen knew something had to be done with the chief executive. At Sainsbury, Dino Adriano was sidelined. At NatWest, Derek Wanless was handed his P45.

Salsbury is a proud man. He almost certainly could not accept having either an executive chairman brought in over his head or a managing director breathing down his neck.

Leading City investors are already telling me that Salsbury's days are numbered. Some say it with relish, but many say it with regret. The poor guy never had a chance.

On the wrong track

It may end up being the most expensive pounds 6m that Gerald Corbett ever spent. The raising of Railtrack's interim dividend this week was like a red rag to a bull - the bull being Tom Winsor, the rail regulator who is ready to lock horns with Railtrack.

Corbett's argument appears sensible. Railtrack is going to have to raise money from the City to invest in the rail network, so it has to keep investors happy. It is making good profits and so the City expects a good dividend. And anyway, it was not Railtrack's fault that a train at Paddington jumped a red light and had an accident.

That is terribly naive. Winsor has already made clear that the pounds 27bn that Railtrack has promised to invest in the network over 10 years is not enough. And now he is saying that Railtrack's plan to increase this to pounds 40bn is also too low. Winsor is to press Railtrack until, in Denis Healey's famous phrase, the "pips squeak".

Corbett should have realised that, post Paddington, there was a need for contrition. The City would have understood if the dividend was left alone at the interim stage, and may even have understood if Railtrack kept its money in its pocket at the end of the year. The Railtrack board has made a strategic, and maybe costly, error.

Another own goal

With the possible exception of Ann Widdecombe, there appears to be little sign of intelligence at the top of the Tory party. The way its Treasury team fell on the OECD report revealing the percentage of tax paid by the British since Labour has come to power shows that they are either ignorant, or conveniently forgetful of, the reasons behind this.

Gordon Brown is not soaking the rich. It is merely that changes in the way the Inland Revenue is run, with greater computerisation, self-assessment and a tougher attitude to corporations, has increased the yield on taxes already in place. And who was responsible for the changes in the Revenue that brought about this state of affairs? Kenneth Clarke. The last Tory Chancellor.

j.nisse@independent.co.uk

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