MARKS AND SPENCER
THE CORPORATE CODE
1.2 Company background (pj4)
1.3 Combined Code(pj5)
1.4 Cadbury Committee (pj6)
1.5 Greenbury Committee (pj6)
1.6 Turnball Committee(pj6)
1.7 Provisions for the board(pj6)
1.8 Provisions for chairman and chief executive (pj7)
1.9 Provisions for chairman and chief executive (pj7)
1.10 Principle for institutional shareholders (pj7) 1.11 Analysis (pj7)
1.12 Conclusion (pj9)
1.13 Recommendations (pj11)
2. References (pj12)
On 10 March 2008 Marks & Spencer group announced that Sir Stuart Rose was to become executive chairman on 1 June 2008. Most investors and major shareholders were not happy with this arrangement. The board applied the ‘comply or explain’ approach to ensure the company’s ongoing success.
This report will analyse the problem from both sides that have been caused by the appointment of Sir Stuart Rose as the new executive chairman and in addition briefly explaining relevant portions of the code.
It will also examine Marks and Spencer (M&S) as a whole and how it is operated and managed. This includes shareholders, non executives and investors. The corporate code is also visited and the relevant areas explained and how it is linked to the corporate governance of M&S. A detailed analysis will be carried out and recommendations will be presented on the best possible way the appointment of Sir Stuart Rose should have been followed.
The actions taken by M&S are to be reviewed in accordance with the requirements of the combined code. This report will reflect to what extent the company complied with the nine provisions of the combined code (2006). This report will demonstrate that M&S’s actions were in error.
1.2 Company Background
M&S was formed in 1884, it was incorporated in 1903. In 1926 M&S become a public limited company. During the years M&S introduced a variety of services to the public. M&S appointed Sir Stuart Rose as the company’s executive chairman on 1 June 2008 and is to be re-elected every year at the annual general meeting (AGM). At the moment his salary is £1.13 million a year. Lord Burns who was the chairman until the appointment of Sir Rose, has a payout of £450,000 paid in 12 monthly instalments starting June 2008. M&S is a FTSE 100 company and has 10 members to provide balance in the board make up and also facilitate the business strategy as stated in the combined code 06 to balance the skills and experience within the board.
1.3 Combined Code on corporate governance
“The code” has been put into practice to ensure that companies carry out their duties to shareholders. It is the driving force behind the going concern of a company. It monitors the performance of board of directors. Good governance contributes to efficiency, effectiveness and entrepreneurship. Combined code has a “comply or explain” approach which has given companies the flexibility to decide which is best for the company situation. Companies are expected to comply entirely with the provisions of the code.
The code helps hold these key areas together:
• Strong chairman and chief executive officer
• Great team work and respect
• Efficient governance
• Appropriate use of time
• Strong independent non executives who can challenge and support decisions on behalf of the success of the company The codes’ listings require listed companies on the London stock exchange to explain the code in two parts, firstly showing how they follow the codes main principles and secondly complying with the provisions. The disclosure in the accounts and annual reports should be added if the company chooses not to comply with...