SIR Brian Souter is to move from chief executive to chairman at Stagecoach, a move which is believed to have the support of major investors even though it goes against recommendations in the UK Corporate Governance Code.

After more than 30 years with the business, the 58-year-old, whose most recent annual remuneration was £876,000, made the out-of-the-blue announcement that he planned to step back from the day-to-day running of the company.

However the change, part of a major boardroom shake-up, is not seen as best practice under corporate governance guidelines.

The Code, overseen by the Financial Reporting Council, states: "A chief executive should not go on to be chairman of the same company.

"If, exceptionally, a board decides that a chief executive should become chairman, the board should consult major shareholders in advance and should set out its reasons to shareholders at the time of the appointment and in the next annual report."

Other stock market listed businesses have made the same move, with Allister Langlands of Wood Group the most recent example in Scotland of a chief executive intending to become chairman.

Stagecoach said the board believes the step is justified due to Sir Brian's "deep knowledge and understanding of the global ground transportation industry" and was part of a carefully considered succession plan.

Other changes include Sir George Mathewson retiring as chairman and long-serving finance director Martin Griffiths moving up to be chief executive.

Company secretary Ross Paterson is promoted to the board as finance director and current non-executive director Garry Watts becomes deputy chairman.

The Perth business also intends to hire another non-executive director to further beef up its corporate governance.

Sir George said: "The planned changes reflect a continuation of an evolution of management responsibilities and as a result, the Board anticipates the transition to be smooth."

Key investors are understood to be supportive of the changes which are due to take effect from May next year. In a note, analysts from Investec said: "We do not expect these changes to alter investors' perceptions of the group."

Sir Brian, whose family owns a 26% stake worth £400 million in the transport giant, said: "Now is the right time for me to take a step back from the day-to-day management of the business.

"Stagecoach is in excellent shape and it has always been my intention to pass the baton well in advance of 'retirement' age. My family and I remain committed major shareholders. I am also as passionate as ever about public transport.

"As chairman, I look forward to working with our other board directors to ensure we continue to lead the way in shaping the future of transport and delivering strongly for our investors."

When Sir Brian last stepped back from the business in 1998 it coincided with a period of profit warnings and a decline in share price and market capitalisation.

Initially Scottish Power's Mike Kinski was brought in as chief executive as the group tried to expand following the £750m acquisition of Coach USA.

However he lasted just two years before resigning and being replaced by Stagecoach's then finance director Keith Cochrane.

Mr Cochrane, now chief executive at Weir Group, resigned in July 2002, with Mr Souter becoming permanent chief executive in December of that year.

Yesterday, Sir Brian paid tribute to the incoming executive team.

He said: "Martin and I have been a team for around a decade and we will continue to work closely together. I'm confident he will be an excellent chief executive as he continues to deliver on our successful organic growth strategies.

"Ross, too, has had a senior role in the financial management of the Group over the last 13 years. I have strong confidence in him and I would like to congratulate him on his appointment."

Mr Griffiths said he was "honoured and delighted" to be taking on the chief executive role.

Stagecoach signalled a 5.7% drop in revenue at its London bus operations due to the ending of less profitable contracts.

The regional UK bus arm was up 4.1%, North America – not including the disposal of Wisconsin school buses – was up 10.4% and UK rail was up 6.8%.

Stagecoach shares fell 4.3p, or 1.45%, to 292.9p.