Martin Flanagan: Swannell will help M&S make peace with the City after Rose controversy

Published on Sunday 22 August 2010 20:11

MARKS & Spencer clearly wants to mend fences with the City via its appointment of Robert Swannell as the retailer's new chairman. M&S's relationship with its institutional investors has never really recovered from the frostiness that began two years ago when Sir Stuart Rose was elevated from chief executive to executive chairman with what seemed a thumbing of the nose to best corporate governance practice.

As Rose himself said yesterday, Swannell's appointment "enables us to revert to standard governance practice". The new man, who becomes a non-executive at M&S on 4 October and chairman on Rose's departure on 4 January, has extensive experience of both the City and the business world, and will undoubtedly be welcomed by the company's big shareholders.

Apart from knowing how M&S's institutional investors think - he helped M&S and Rose fend off the unwanted attentions of Sir Philip Green six years ago - his breadth of boardroom experience is impressive. Swannell is chairman of music and movie retailer HMV and the senior independent director at both British Land and 3i Group.

He is both a chartered accountant and a barrister, and also well-plugged into the regulatory world as a member of the regulatory decisions committee of the Financial Services Authority, as well as being a member of the City's Takeover Panel Appeal Board, and a past member of the Industrial Advisory Board of the Department for Business.

In other words, as chairman-elect of one of Britain's best-known retailers, Swannell is impeccably connected and with broad experience.

This will be particularly useful to offset M&S having have three new boys at the top table in short order in chairman, new chief executive Marc Bolland and finance director Alan Stewart (Ian Dyson as the former FD having pre-empted Rose out of the door earlier this summer when it was clear he had lost out on getting the top job).

Relations with the institutions will no doubt also be helped by Swannell's big drop in salary from what was another shareholder bugbear, remuneration at M&S.

Rose was on 875,000 when he took the purple as executive chairman in the boardroom, and the institutions' noses were rubbed in it by Bolland being lured from Morrisons with a 1 million salary and an incentive package worth between 10m and 15m.

By contrast, Swannell will be on a salary of about 450,000, nearly 50 per cent less than Rose (who admittedly was executive chairman, not non-executive chairman), and in line with the pay that previous M&S non-executive chairmen like Lord Burns and Luc Vandevelde were on.

Boardroom succession aside, M&S faces future operational challenges in an unhelpful climate for retailers.Smooth relations with the City will need more than banking savvy and political nous, it is earnings that will translate into dividends.

But Swannell will leave that up to Bolland, who clearly did a pretty good job in turning around Morrison after it had nearly been capsized by the Safeway acquisition.

The new chairman's role will be to get the institutions onside to give Bolland the time to work any further retail magic he can come up with. Swannell's background suggests Bolland will not have to deflect his focus from strategic and operations matters to the boardroom controversy that attended Rose's final furlongs with M&S.

Consolidation in the drinks sector is back on the table

THE industry consolidation party is getting in good swing, so the City decided it was time to pour itself another speculative drink. To wit: is SABMiller contemplating a 7 billion swoop on Australia's Carlton & United Breweries, the beer-making arm of the Foster's Group?

The South African beer giant isn't saying, but fevered speculation now surrounds the matter as takeovers return to the table, what with Vedanta going for Cairn India and Korea's KNOC gunning for Dana Petroleum in oil and gas, while BHP Billiton is in for PotashCorp, the world's biggest fertiliser group, and HSBC is looking at Nedbank in South Africa.

You would think it would make more sense for SABMiller, which is understood to have appointed Royal Bank of Scotland as an adviser on a potential deal, to wait for Foster's to demerge Carlton from its wine business next spring.

But perhaps SABMiller is concerned, as reports suggest, that Asahi of Japan or Canada's Molson Coors will beat it to the punch with a bid for Foster's lager and its best-known stablemate, Victoria Bitter, sponsor of the Australian cricket team.

Two years ago the world's biggest beer company, Anheuser-Busch Inbev, was created by a takeover of the American company by Inbev, and Scottish & Newcastle was taken over and split up between Heineken and Carlsberg. Could drinks consolidation be back on the scene?