Morrison heads for showdown with deputy in board dispute

Sir Ken Morrison, the chairman of Wm Morrison, is set to hold crucial talks with his deputy this morning in an escalating dispute over the appointment of new non-executive directors.

Sir Ken Morrison, the chairman of Wm Morrison, is set to hold crucial talks with his deputy this morning in an escalating dispute over the appointment of new non-executive directors.

Amid signs of turmoil at the top of the supermarket chain, David Jones has had all his candidates for a strengthened board vetoed by Sir Ken. And the dispute between the two men is believed to have widened into a row over the timing of 73-year-old Sir Ken's departure from the company he has run for almost five decades.

At this morning's meeting the pair will try to tackle the impasse but investors fear an ugly showdown.

Shareholders have been demanding the appointment of additional board members as a counterweight to Sir Ken, whose stock in the City has plummeted after five profit warnings since the takeover of Safeway last year.

But Sir Ken is arguing that the obsession with corporate governance is standing in the way of bringing Morrisons back to financial health, and that Mr Jones has yet to suggest a candidate which the City will see as a proper heavy hitter.

Only two of the four names on Mr Jones' shortlist have become public. The first is Nigel Robertson, the founder of the Ocado grocery home delivery business and more recently part of a consortium that bought the Early Learning Centre. The second is Susan Murray, the chief executive of the Advertising Standards Authority and a former chief executive of Littlewoods Stores.

Last month, Helen Weir, a former finance director of Lloyds TSB, pulled out after being named in the press as a possible candidate.

Hanson Green, the headhunters, are widening the search, which is being led by Ffion Hague, the wife of the former Conservative leader.

Investor calls for boardroom changes, including a proper plan for the succession to Sir Ken, have grown as Morrisons' financial crisis has escalated.

One in five shareholders voted against Sir Ken's re-election at the company's annual meeting in May, since when there has been a further profit warning.

The costs of running two distribution and IT systems have spiralled out of control after Morrisons' decision to accelerate the mammoth task of converting 260 ex-Safeway stores. So have staff costs, a problem compounded by the fact that the company has yet to drive sufficient extra sales from the converted stores to pay for extra bodies on the shop floor. Meanwhile, trading at the core Morrisons estate is deteriorating.

Many long-standing executives are keen to avoid a situation where Sir Ken and Mr Jones, who as sole non-executive is seen as representing shareholder interests, can no longer work together, and insiders say the two are still talking.

Supporters of Mr Jones believe that Sir Ken's stalling over the appointment of non-executives is a tactic to delay debate over his own position. The idea of elevating Sir Ken to life president, with no operational control over the business, was floated in one newspaper over the weekend and is likely to be an early item on the boardroom agenda when new non-executive directors join.

However, Sir Ken loyalists within the company believe he should stand up to Mr Jones, saying his intimate knowledge of the business and his relationships with managers and suppliers makes him indispensable.

And he remains keen to stay to oversee the disaster-stricken integration of Safeway through to a position where the business is back on an even keel.

At the annual shareholder meeting four weeks ago, when he appeared occasionally close to tears on receiving the tributes of loyal private shareholders, Sir Ken said the company would revisit the issue of the succession next year.

Although he resigned from the company's operating board, he is still firmly in executive control of the company.

Also at the AGM, Mr Jones promised he would have made significant new appointments within four to six weeks.

SIR KEN MORRISON, 73

Son of William Morrison, he has run the Bradford-based chain since 1956. Floated the company in 1967 but maintains an aversion to the City that has increased his difficulties since the audacious and ultimately botched integration of Safeway.

DAVID JONES, 62

Built his reputation over 19 years at Next, the ever-expanding clothing chain, where he remains the chairman. He was brought on as one of Wm Morrison's first two non-executives last year, but is the only one who has stayed.