M&S confound the prophets by backing Rose

An anticipated rebellion against Sir Stuart Rose's promotion to executive chairman at Marks & Spencer failed to materialise on the scale predicted yesterday as his reappointment to the board received 77.9% shareholder backing.

Only 4.9% of investors opposed his re-election and another 17% of those participating withheld their vote. It had been anticipated that as many as a third of institutional investors would rebel after several voiced anger over the lack of consultation before the company announced his promotion in January.

The company pulled out all the stops to back their man, who has been under increased pressure since he ditched the head of his food business last week barely a year after hiring him and revealed falling sales.

David Michels, the deputy chairman and the most senior non-executive at M&S, repeatedly backed Rose's elevation: "The board, particularly the non-executives, could have taken the coward's way out and said no-one will like it outside. We took hopefully the right and certainly the most difficult decision. We are convinced history will show us we have made the right decision."

Michels made much of the increased responsibilities given to finance and operations director Ian Dyson, which will only heighten speculation that he is best placed to succeed Rose when he retires in 2011.

There was also a contribution from the floor from former M&S deputy chairman Clinton Silver, who told shareholders that Rose was responsible for a turnaround at the company since he joined in 2004. "I would like to hope that all of my fellow shareholders realise that when he joined this company he snatched it back from the brink of the abyss."

He pointed to M&S's history under previous powerful chairmen and cited the fortunes of the banking sector as an example of the ineffectiveness of a non-executive chairman.

"M&S has to have a merchant at its head," he added.

Afterwards, rebel shareholders tried to claim success in raising their agenda.

Alan MacDougall, managing director of corporate governance adviser PIRC, said: "The size of today's vote would be significant if it were against any director, let alone the head of an iconic business, and demonstrates the depth of investor unease."

Pat Wade, corporate governance manager at the Co-operative Investments, which withheld its vote, said: "We hope the board will now take action to address those concerns at the earliest opportunity as we believe these issues are intrinsic to long-term shareholder value."

Rose, switching frequently during the meeting between overseeing proceedings, attempted to assuage concerns about his role. "I expect to remain accountable for the decisions I take," he said.

He said he took responsibility for hiring director of food Steven Esom, who joined M&S from Waitrose in June 2007 and was promoted to the board earlier this year before being suddenly axed last week due to falling sales.

Rose said: "I am afraid it was just one of those situations where it just doesn't work." He added that weakness in the business was partly due to pressures on consumer spending but also due to failures on availability, pricing and promotions and the "level of innovation".

He added that since Esom was replaced by 15-year M&S veteran John Dixon, who previously ran the home and M&S Direct businesses, "we have seen a change of pace".

But he repeatedly returned to the economic headwinds facing the business.

"Marks & Spencer is a bit like an early warning system or smoke detector in your kitchen. It has the largest market share of any clothing retailer and the widest geographical spread.

"It listens to its customers and they are saying their purses are pressed. They are saying the cost of living is going up faster than for a long time. They are saying they are feeling the squeeze."

But the M&S chief pledged to carry on with investment plans such as store refurbishments. The company has 643 stores in the UK, including 144 franchises, employing some 72,000 people.

M&S also received shareholder backing for continued authority to buy back shares, a tactic the company has been criticised for pursuing in a falling market.

Its shares closed up 2.5p at 234p, a 1% gain on the day.

Never mind the share price, what about dresses with sleeves?

THIS was not just heckling, this was full-blooded, slow hand-clapping, hooting, M&S-style heckling, writes Tim Sharp.

In short, Marks & Spencer's shareholders were angry. The source of their fury was not the promotion of Sir Stuart Rose to executive chairman or the fact that since they last met the company's share price had dropped from 641p to 232p.

What raised their ire was a lack of sleeves on the company's dresses, the narrowness of their shoes, and they would mount the barricades before anyone messed with the quality of produce in its food halls, credit crunch or no credit crunch. Oh yes, and anyone who talked for too long during the question and answer session was jeered from the microphone.

Naturally the shareholder contributions were of a higher order than that at an ordinary annual meeting. "I think if Confucius was alive today he would say he who designs the furniture has never done the housework'," said one.

Another, unhappy with an answer, quoted Profumo scandal bit player Mandy Rice-Davies: "Well, he would say that, wouldn't he?"

The demands were specific. Questioner number one wants "summer dresses, pretty ones with sleeves and not too low". Another wants broader shoes ("Americans have notoriously thin heels") and a third thinks its items are "either too long in the leg or too expensive" (presumably never both).

But Rose, resplendent in an imperial purple tie, smoothed the waters. One woman can't find the bra she likes in the right material. Well, said Rose, our head of clothing Kate Bostock will take you shopping. "If Kate is too busy I will take you myself." Inappropriate? Well, that either didn't register with the woman or the thought of half-an-hour in the lingerie department with the suave executive didn't seem such a bad idea.

For Rose knows the concerns of his hardcore shopper. "M&S will have been on the high street for 125 years next year. I firmly believe we will be on the high street for 100 years to come," he said to applause from a group determined that their grandchildren and great-grandchildren will continue to have access to high quality pants and robust Victoria sponges. What the share price does is of secondary importance.