Poor old Sir Richard Greenbury. Not only does he seem consigned to being remembered as Marks & Spencer’s chairman during the twilight years, rather than previous decades when he took the retailer into a class of its own, but even his Greenbury Committee’s recommendations on executive remuneration face oblivion.
You’ll recall that Greenbury reported to Parliament in the mid-1990s during all the pre-General Election fuss over fat-cat pay. It was partly because of that exercise that the then Chancellor Ken Clarke took what turned out to be precipitate restrictive action over share-option incentive schemes.
Today, M&S has a newly-appointed successor whose remuneration package includes a share-incentive scheme to die for, a rolling contract at advantageous variance with his executive colleagues and a £2.2m “golden hello”. He is also executive chairman – a post Greenbury was forced to vacate in the climate of enlightened, millenarian corporate governance.
In fairness, the business of splitting the executive roles of chairman and chief executive was the work of the much earlier Cadbury Report, but in matters of corporate governance British industry doesn’t distinguish between its meddlers.
I’m afraid it’s also as simple as confusing the “brand names” of the two committees. And “bury” is what most companies would like to do with Cadbury/Greenbury.
It’s also true that another “bury”, Peter Salsbury, the embattled chief executive of M&S, may have noticed the irony of how late-20th-century corporate governance rubrics have been buried in the appointment of the new chairman.
I take heed of anecdotal consumer impressions of a company like M&S as much as those of City pundits. My PA, Despo, is Greek and something of an oracle on matters retail, at least at the consumption end of the market. She watched Luc Vandevelde on the evening news and said simply: “I don’t believe him.”
He is evidently more credible at the institutional investment end of the market than he is to my Greek oracle, though the company’s share price hardly took off on the news. This was partly because his appointment had been so carefully flagged to the City over previous weeks that the “V-factor” was already in the price. And that was a sensible way for M&S to proceed. Surprising the stock market is not something it should do at the moment.
The care M&S took over the appointment of Vandevelde is one of the more bullish points for M&S going forward. Other positive indicators relate to Vandevelde’s undoubted proven track record, not only as chairman of French retailer PromodÃÂ¨s but his less widely hailed post as chief executive of Italy and France for Kraft. If it wasn’t to be Vandevelde for M&S, it’s difficult to come up with an alternative name that would have been a better bet.
So, having started with rather grudging comments about corporate governance, I end up applauding both the fact and method of Vandevelde’s appointment. Compare and contrast this with another recent top retail appointment – that of Sir Peter Davis, chief executive of the Prudential Corporation, to the post of chief executive at J Sainsbury.
Not only did this come as rather more of a surprise – some may even say shock – to the market, but we are entitled to ask whether Davis presents the same prospect of salvation.
The comparison is a just one because much of the challenge facing Vandevelde translates into the one facing Davis. Both retailers are, in City terms, past their sell-by date. Both need to recapture pre-eminent positions in their markets.
At its simplest, M&S has lost the loyalty to its brand that it once commanded. At the lower end of the clothing market, it has failed to compete against other supermarkets and discount stores. At the top end, it has been outflanked by nimbler operators with a finger on the fashion pulse, such as H&M, Gap and Next.
Substitute Sainsbury for M&S, groceries for clothing and Tesco for the nimbler competitors and you have the task facing Davis. But has Sainsbury found in Davis what M&S has in its Belgian recruit?
There are those who would claim turning around PromodÃÂ¨s is analogous to turning around the Pru. I’m not so sure. It’s true Davis is to be congratulated for pulling the mighty Pru out of the dark, post-the Mick Newmarch days of regulatory intervention over the pensions mis-selling debacle. Pru’s pioneering work with Egg, though fraught with early difficulties, has dragged the institution into the 21st century of financial services provision. But let’s note that Davis was on the board of the dismally-performing Boots from 1991 until the Sainsbury appointment, the chemist’s market and earnings having been eroded by the supermarkets. We should also be suspicious of the motives behind the TV commercial Davis fronted for the Pru.
What I’m saying is that we have two retailers with new bosses facing the challenge of recovery and it will be interesting to track their progress. No, let’s be honest – what I’m really saying is sell your Sainsbury shares and buy M&S’.
George Pitcher is a partner of issue management consultancy Luther Pendragon