Investors attack M&S plan to make Rose chairman

Shareholders in Marks & Spencer called into question the retailer's decision to promote its chief executive, Sir Stuart Rose, into the role of executive chairman as part of a sweeping management shake-up at the group yesterday.

The announcement that Lord Burns would stand down as chairman at the high-street chain from 1 June to be replaced by Sir Stuart in an executive role until July 2011 put an end to months of speculation about the future of the management team. The City had been expecting Sir Stuart to leave next year when his current contract ends.

As part of the management overhaul, the finance director, Ian Dyson, will take on additional responsibilities, including managing the store network and human resources. Kate Bostock, who was in charge of women's and children's clothing and lingerie, has been appointed to the board and will oversee all clothing, except the Per Una range, while Steven Esom, responsible for food, has also been appointed to the board. Steve Sharp will continue as executive director of marketing. All four are seen as potential successors to Sir Stuart.

In addition, Sir David Michels, the former chief executive of the hotels group Hilton, has been appointed deputy chairman, and a further non-executive director will also be appointed soon.

Lord Burns said it "was important to retain Stuart Rose in the business for longer". He said: "We want him to play a bigger role in terms of developing the next generation of leaders so that by the time he leaves we have a new chief executive in place. This reduces the uncertainty over whether he will stay or not."

He added that as well as developing talent, Sir Stuart will also be looking at product areas. "He will be concentrating on products, food and clothing, but the nuts and bolts and operating issues will be taken over by Ian Dyson and others," Lord Burns said.

Sir Stuart Rose added that his task will be "to guide the business through the next stage of growth".

Shareholders have been generally supportive of the decision, Lord Burns said. M&S is required to give an explanation as to why it has moved the chief executive into the chairman role, as it is against corporate governance guidelines.

However, Mark Burgess, the head of equities at Legal & General Investment Management, which is one of M&S's biggest shareholders, was unhappy with the announcement. "As set out in the Combined Code we believe strongly in the separation of the roles of chairman and chief executive, believing that this provides a much-needed balance in the boardroom, and prevents potentially damaging concentration of power," he said.

Stuart Fowler, the head of equities at AXA Investment Management, added: "This is not normal practice and we are waiting for an explanation."

The Association of British Insurers, whose members hold about 20 per cent of the FTSE 100, said the move was "unorthodox". Peter Montagnon, its director of investment affairs, said: "The approach as announced does raise some pretty fundamental concerns for our members. We need a convincing explanation which should be available to all shareholders of why this new board structure is necessary. They have a lot of work to do to persuade people that this is the right approach."

But analysts said the move put an end to the speculation regarding Sir Stuart's position and said Mr Dyson's increased responsibility suggests he is being earmarked for the top job.

Nick Bubb, of Pali International, said Sir Stuart did not want to bow out next year on a low note, following a weak Christmas trading update which saw M&S shares fall 18 per cent. "They haven't really found a successor yet and Stuart Rose will be wanting to try to turn it around. But this is not going to be easy given the pressure on the marketplace."

Sir Stuart was brought in in 2004 to help fend off a 400p-a-share bid for M&S by Sir Philip Green. The 58-year-old has been credited with staging a remarkable recovery at the retailer, helped by high-profile campaigns with models such as Twiggy. However, a poor summer and a weak winter period has led to M&S losing market share. M&S shares fell 3p to 375p yesterday.