Stuart Rose faces shareholder revolt at M&S annual meeting

Marks & Spencer shareholders are being urged to vote against the retailer's chairman Sir Stuart Rose at next month's annual meeting in protest at his promotion from chief executive.

Corporate governance research group Pensions and Investment Research Consultants (PIRC) has advised its clients - who include many local authority pension funds and faith-based investors - to show their disapproval of Rose's new role. His promotion to executive chairman in March contravenes the City code on boardroom standards. The code favours independent, non-executive chairmen appointed from outside the business. It says chief executives should not be promoted to the chairman's role and it also warns against an individual simultaneously holding the roles of chief executive and chairman.

Legal & General, one of the retailer's top five investors, described Rose's role as "potentially damaging".

In a bid to soothe angry investors Rose agreed to put himself up for re-election to the M&S board annually, rather than every three years as required by law. But PIRC's recommendation says: "The roles of chairman and chief executive are completely different and should be separated."

It adds: "Combining the roles represents a dangerous concentration of power that is potentially detrimental to board balance, effective debate and board appraisal".

PIRC says combining the roles can only be justified "on a temporary basis under highly exceptional circumstances". Rose intends to do both jobs for three years while he grooms a new chief executive from the ranks of his lieutenants.

M&S's rationale for the promotion is that it is impossible for the best successor to be identified while Rose is still in the job. But PIRC does not accept the retailer's reasoning and described the three-year timescale as "beyond a reasonable length of time". The research group also revealed that it had considered filing a special resolution to address the "specific question" of Rose's new job, so that shareholders could vote in favour of him as a chief executive but show their opposition to him being named as chairman too.

However, PIRC said: "despite being able to meet the ownership requirements to file, the costs involved within the timescale were prohibitive."

An M&S spokesman said that filing a resolution would have been free if it had been submitted by the end of March. However, the PIRC campaign was not announced until March 10 and it was April 3 when the then M&S chairman Lord Burns sent a letter to shareholders explaining the reasons behind the promotion. He has since stepped down, and is receiving a year's salary, £450,000, as a pay-off. Burns will not be fronting the annual meeting to explain why he allowed the move. Commenting on the PIRC voting guidance the M&S spokesman said: "They are entitled to their views. We have made our position clear."

The Association of British Insurers, has stopped short of recommending a vote against Rose. But in its voting guidance it gave the company an "amber top" - which urges shareholders to consider the issues carefully before voting.

Senior fund managers estimate that up to 20% of shareholders could vote against Rose at the annual meeting on July 9. There could also be a substantial vote against proposals to change boardroom incentive plans that will make it easier for directors to achieve big payouts.