M&S leadership battle tactics unnerve City

CITY ANALYSTS yesterday expressed surprise at the tactics being adopted by Marks & Spencer's directors as the leadership contest to decide who should take control of Britain's leading retailer threatened to become a bitter boardroom battle.

City concerns surfaced after reports at the weekend suggested that Keith Oates, M&S's deputy chairman, is planning to lobby the company's non-executive directors in a bid to establish himself as the logical successor to Sir Richard Greenbury, the group's chairman and chief executive.

Sir Richard is expected to split the two roles next spring. Mr Oates was until recently seen as Sir Richard's heir apparent, but in the past six months he has been overtaken by Peter Salsbury, the group's managing director in charge of general merchandise.

Analysts were yesterday expressing concern that the internal squabbling could split the board and distract management attention at a time when the retail giant has just reported its first profits fall in seven years.

The bitterness of the battle will also increase the likelihood that the loser may be forced to leave the company.

"I am surprised it has all blown up like this at a time when they should all be pulling together," one analyst said. "These are difficult times and they should be working on getting the business right, not fighting like ferrets in a sack."

Another analyst said it was surprising that M&S had allowed the fight to spill over into the public arena after making such an effort to clarify its position on the leadership issue at its half-year results presentations last week.

The analyst said: "Oates looked relaxed and Sir Richard made an effort to spread the questions around the other directors so everyone got their say."

Mr Oates is thought to have launched a direct appeal to some of the M&S non-executives after reports last week suggested that Sir Richard would split the roles following the completion of a strategic review in the spring. It is thought that Mr Salsbury has gradually emerged as Sir Richard's favoured successor and is also seen internally as the man behind whom the board can most easily rally.

This may have irked Mr Oates who, as deputy chairman, is the most senior executive on the board after Sir Richard. Of the two candidates, the 56- year-old Mr Oates is the more highly regarded in the City. An M&S "outsider", he joined the company in 1984 after spells at IBM and Black & Decker. He is credited with building up the successful financial services business of M&S.

Peter Salsbury has been with M&S his entire working life since joining as a graduate trainee in 1970. Now 46, he is seen as more in the Greenbury tradition, a merchandise man with more hands-on operational experience but less flair for new ideas and change.

"The City sees Oates as more user-friendly and more of an innovator," one analyst said. "Salsbury is seen as the grey man who has risen without trace."

The other candidates, who are seen as long shots in the race, are Lord Stone, who runs the M&S food operation and Chris Littmoden, who runs the US business.

The non-executives who will play key parts in the succession question are Sir Martin Jacomb form Prudential, Brian Baldock, who was with Guinness, Sir Michael Perry, formerly head of Unilever, Ralph Robins of Rolls-Royce and Stella Rimington, the former head of MI5.